YASKAWA Electric (TSE:6506) Hasn't Managed To Accelerate Its Returns

There are a few key trends to look for if we want to identify the next multi-bagger. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Although, when we looked at YASKAWA Electric (TSE:6506), it didn't seem to tick all of these boxes.

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What Is Return On Capital Employed (ROCE)?

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. Analysts use this formula to calculate it for YASKAWA Electric:

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

0.089 = JP¥50b ÷ (JP¥744b - JP¥180b) (Based on the trailing twelve months to February 2025).

Therefore, YASKAWA Electric has an ROCE of 8.9%. On its own, that's a low figure but it's around the 7.7% average generated by the Machinery industry.

View our latest analysis for YASKAWA Electric

Above you can see how the current ROCE for YASKAWA Electric compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for YASKAWA Electric .

So How Is YASKAWA Electric's ROCE Trending?

There are better returns on capital out there than what we're seeing at YASKAWA Electric. The company has employed 81% more capital in the last five years, and the returns on that capital have remained stable at 8.9%. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.

The Key Takeaway

In conclusion, YASKAWA Electric has been investing more capital into the business, but returns on that capital haven't increased. Since the stock has declined 15% over the last five years, investors may not be too optimistic on this trend improving either. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere.

If you'd like to know more about YASKAWA Electric, we've spotted 4 warning signs, and 2 of them are a bit unpleasant.

While YASKAWA Electric isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.