Mitsubishi Kakoki Kaisha (TSE:6331) Is Doing The Right Things To Multiply Its Share Price

There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Speaking of which, we noticed some great changes in Mitsubishi Kakoki Kaisha's (TSE:6331) returns on capital, so let's have a look.

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

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Mitsubishi Kakoki Kaisha:

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

0.10 = JP¥4.4b ÷ (JP¥63b - JP¥21b) (Based on the trailing twelve months to March 2024).

Therefore, Mitsubishi Kakoki Kaisha has an ROCE of 10%. On its own, that's a standard return, however it's much better than the 7.8% generated by the Construction industry.

View our latest analysis for Mitsubishi Kakoki Kaisha

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how Mitsubishi Kakoki Kaisha has performed in the past in other metrics, you can view this free graph of Mitsubishi Kakoki Kaisha's past earnings, revenue and cash flow.

The Trend Of ROCE

We like the trends that we're seeing from Mitsubishi Kakoki Kaisha. Over the last five years, returns on capital employed have risen substantially to 10%. The amount of capital employed has increased too, by 31%. So we're very much inspired by what we're seeing at Mitsubishi Kakoki Kaisha thanks to its ability to profitably reinvest capital.

The Bottom Line On Mitsubishi Kakoki Kaisha's ROCE

All in all, it's terrific to see that Mitsubishi Kakoki Kaisha is reaping the rewards from prior investments and is growing its capital base. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. Therefore, we think it would be worth your time to check if these trends are going to continue.

If you want to know some of the risks facing Mitsubishi Kakoki Kaisha we've found 3 warning signs (1 is concerning!) that you should be aware of before investing here.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com