Investors Will Want TOKYO KEIKI's (TSE:7721) Growth In ROCE To Persist

If you're looking for a multi-bagger, there's a few things to keep an eye out for. 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. With that in mind, we've noticed some promising trends at TOKYO KEIKI (TSE:7721) so let's look a bit deeper.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

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. To calculate this metric for TOKYO KEIKI, this is the formula:

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

0.11 = JP¥5.7b ÷ (JP¥76b - JP¥25b) (Based on the trailing twelve months to September 2025).

Therefore, TOKYO KEIKI has an ROCE of 11%. In absolute terms, that's a satisfactory return, but compared to the Machinery industry average of 7.9% it's much better.

Check out our latest analysis for TOKYO KEIKI

Above you can see how the current ROCE for TOKYO KEIKI compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering TOKYO KEIKI for free.

How Are Returns Trending?

TOKYO KEIKI is displaying some positive trends. Over the last five years, returns on capital employed have risen substantially to 11%. Basically the business is earning more per dollar of capital invested and in addition to that, 55% more capital is being employed now too. So we're very much inspired by what we're seeing at TOKYO KEIKI thanks to its ability to profitably reinvest capital.

The Bottom Line

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what TOKYO KEIKI has. And a remarkable 582% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if TOKYO KEIKI can keep these trends up, it could have a bright future ahead.

One more thing, we've spotted 1 warning sign facing TOKYO KEIKI that you might find interesting.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.