Be Wary Of MINEBEA MITSUMI (TSE:6479) And Its Returns On Capital

There are a few key trends to look for if we want to identify the next multi-bagger. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's 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. In light of that, when we looked at MINEBEA MITSUMI (TSE:6479) and its ROCE trend, we weren't exactly thrilled.

Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on MINEBEA MITSUMI is:

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

0.092 = JP¥91b ÷ (JP¥1.5t - JP¥530b) (Based on the trailing twelve months to September 2024).

So, MINEBEA MITSUMI has an ROCE of 9.2%. On its own, that's a low figure but it's around the 7.9% average generated by the Machinery industry.

View our latest analysis for MINEBEA MITSUMI

In the above chart we have measured MINEBEA MITSUMI's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering MINEBEA MITSUMI for free.

How Are Returns Trending?

In terms of MINEBEA MITSUMI's historical ROCE movements, the trend isn't fantastic. Around five years ago the returns on capital were 12%, but since then they've fallen to 9.2%. Meanwhile, the business is utilizing more capital but this hasn't moved the needle much in terms of sales in the past 12 months, so this could reflect longer term investments. It may take some time before the company starts to see any change in earnings from these investments.

Our Take On MINEBEA MITSUMI's ROCE

To conclude, we've found that MINEBEA MITSUMI is reinvesting in the business, but returns have been falling. And investors may be recognizing these trends since the stock has only returned a total of 23% to shareholders over the last five years. Therefore, if you're looking for a multi-bagger, we'd propose looking at other options.

MINEBEA MITSUMI could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation for 6479 on our platform quite valuable.

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.