Returns At Oriental Chain Mfg (TSE:6380) Appear To Be Weighed Down

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. In light of that, when we looked at Oriental Chain Mfg (TSE:6380) and its ROCE trend, we weren't exactly thrilled.

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

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for Oriental Chain Mfg:

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

0.044 = JP¥142m ÷ (JP¥5.1b - JP¥1.9b) (Based on the trailing twelve months to March 2025).

Thus, Oriental Chain Mfg has an ROCE of 4.4%. In absolute terms, that's a low return and it also under-performs the Machinery industry average of 8.5%.

See our latest analysis for Oriental Chain Mfg

Historical performance is a great place to start when researching a stock so above you can see the gauge for Oriental Chain Mfg's ROCE against it's prior returns. If you'd like to look at how Oriental Chain Mfg has performed in the past in other metrics, you can view this free graph of Oriental Chain Mfg's past earnings, revenue and cash flow.

What Can We Tell From Oriental Chain Mfg's ROCE Trend?

Over the past , Oriental Chain Mfg's ROCE and capital employed have both remained mostly flat. It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. With that in mind, unless investment picks up again in the future, we wouldn't expect Oriental Chain Mfg to be a multi-bagger going forward.

The Bottom Line

We can conclude that in regards to Oriental Chain Mfg's returns on capital employed and the trends, there isn't much change to report on. Yet to long term shareholders the stock has gifted them an incredible 281% return in the last five years, so the market appears to be rosy about its future. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.

One final note, you should learn about the 4 warning signs we've spotted with Oriental Chain Mfg (including 2 which make us uncomfortable) .

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.

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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.