The Return Trends At Hitachi Construction Machinery (TSE:6305) Look Promising

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base 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. So when we looked at Hitachi Construction Machinery (TSE:6305) and its trend of ROCE, we really liked what we saw.

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

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on Hitachi Construction Machinery is:

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

0.13 = JP¥154b ÷ (JP¥1.8t - JP¥582b) (Based on the trailing twelve months to September 2025).

Thus, Hitachi Construction Machinery has an ROCE of 13%. On its own, that's a standard return, however it's much better than the 8.2% generated by the Machinery industry.

Check out our latest analysis for Hitachi Construction Machinery

Above you can see how the current ROCE for Hitachi Construction Machinery compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Hitachi Construction Machinery for free.

What Does the ROCE Trend For Hitachi Construction Machinery Tell Us?

We like the trends that we're seeing from Hitachi Construction Machinery. The data shows that returns on capital have increased substantially over the last five years to 13%. The amount of capital employed has increased too, by 52%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

The Bottom Line On Hitachi Construction Machinery's ROCE

In summary, it's great to see that Hitachi Construction Machinery can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And with a respectable 89% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. Therefore, we think it would be worth your time to check if these trends are going to continue.

If you'd like to know about the risks facing Hitachi Construction Machinery, we've discovered 2 warning signs that you should be aware of.

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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.