Yamashin-Filter (TSE:6240) Shareholders Will Want The ROCE Trajectory To Continue

To find a multi-bagger stock, what are the underlying trends we should look for in a business? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Speaking of which, we noticed some great changes in Yamashin-Filter's (TSE:6240) returns on capital, so let's have a look.

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Return On Capital Employed (ROCE): What Is It?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on Yamashin-Filter is:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.12 = JP¥2.7b ÷ (JP¥27b - JP¥4.3b) (Based on the trailing twelve months to June 2025).

Therefore, Yamashin-Filter has an ROCE of 12%. On its own, that's a standard return, however it's much better than the 8.6% generated by the Machinery industry.

Check out our latest analysis for Yamashin-Filter

Above you can see how the current ROCE for Yamashin-Filter compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Yamashin-Filter .

So How Is Yamashin-Filter's ROCE Trending?

Investors would be pleased with what's happening at Yamashin-Filter. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 12%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 21%. So we're very much inspired by what we're seeing at Yamashin-Filter thanks to its ability to profitably reinvest capital.

The Bottom Line On Yamashin-Filter's ROCE

All in all, it's terrific to see that Yamashin-Filter is reaping the rewards from prior investments and is growing its capital base. And since the stock has fallen 29% over the last five years, there might be an opportunity here. With that in mind, we believe the promising trends warrant this stock for further investigation.

Yamashin-Filter does have some risks though, and we've spotted 2 warning signs for Yamashin-Filter that you might be interested in.

While Yamashin-Filter may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.