Mitsubishi Electric (TSE:6503) Is Doing The Right Things To Multiply Its Share Price

Explore Mitsubishi Electric's Fair Values from the Community and select yours

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding 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. So when we looked at Mitsubishi Electric (TSE:6503) and its trend of ROCE, we really liked what we saw.

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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. The formula for this calculation on Mitsubishi Electric is:

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

0.095 = JP¥430b ÷ (JP¥6.3t - JP¥1.8t) (Based on the trailing twelve months to June 2025).

So, Mitsubishi Electric has an ROCE of 9.5%. Even though it's in line with the industry average of 9.1%, it's still a low return by itself.

Check out our latest analysis for Mitsubishi Electric

In the above chart we have measured Mitsubishi Electric's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Mitsubishi Electric .

How Are Returns Trending?

Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. Over the last five years, returns on capital employed have risen substantially to 9.5%. The amount of capital employed has increased too, by 53%. So we're very much inspired by what we're seeing at Mitsubishi Electric thanks to its ability to profitably reinvest capital.

In Conclusion...

To sum it up, Mitsubishi Electric has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Since the stock has returned a staggering 182% to shareholders over the last five years, it looks like investors are recognizing these changes. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

While Mitsubishi Electric looks impressive, no company is worth an infinite price. The intrinsic value infographic for 6503 helps visualize whether it is currently trading for a fair price.

While Mitsubishi Electric 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.