MITSUI E&S (TSE:7003) Shareholders Will Want The ROCE Trajectory To Continue

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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. So on that note, MITSUI E&S (TSE:7003) looks quite promising in regards to its trends of return on capital.

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Understanding 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. The formula for this calculation on MITSUI E&S is:

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

0.11 = JP¥28b ÷ (JP¥451b - JP¥196b) (Based on the trailing twelve months to June 2025).

So, MITSUI E&S has an ROCE of 11%. On its own, that's a standard return, however it's much better than the 8.5% generated by the Machinery industry.

View our latest analysis for MITSUI E&S

In the above chart we have measured MITSUI E&S' prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for MITSUI E&S .

What Does the ROCE Trend For MITSUI E&S Tell Us?

We're delighted to see that MITSUI E&S is reaping rewards from its investments and has now broken into profitability. The company now earns 11% on its capital, because five years ago it was incurring losses. Interestingly, the capital employed by the business has remained relatively flat, so these higher returns are either from prior investments paying off or increased efficiencies. With no noticeable increase in capital employed, it's worth knowing what the company plans on doing going forward in regards to reinvesting and growing the business. So if you're looking for high growth, you'll want to see a business's capital employed also increasing.

On a related note, the company's ratio of current liabilities to total assets has decreased to 43%, which basically reduces it's funding from the likes of short-term creditors or suppliers. This tells us that MITSUI E&S has grown its returns without a reliance on increasing their current liabilities, which we're very happy with. However, current liabilities are still at a pretty high level, so just be aware that this can bring with it some risks.

Our Take On MITSUI E&S' ROCE

To sum it up, MITSUI E&S is collecting higher returns from the same amount of capital, and that's impressive. Since the stock has returned a staggering 800% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if MITSUI E&S can keep these trends up, it could have a bright future ahead.

On a final note, we found 3 warning signs for MITSUI E&S (1 doesn't sit too well with us) you should be aware of.

While MITSUI E&S 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.