Capital Investments At ArtnerLtd (TSE:2163) Point To A Promising Future

To find a multi-bagger stock, what are the underlying trends we should look for in a business? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So, when we ran our eye over ArtnerLtd's (TSE:2163) trend of ROCE, we really liked what we saw.

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. To calculate this metric for ArtnerLtd, this is the formula:

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

0.31 = JP¥1.5b ÷ (JP¥6.2b - JP¥1.3b) (Based on the trailing twelve months to April 2024).

Thus, ArtnerLtd has an ROCE of 31%. That's a fantastic return and not only that, it outpaces the average of 16% earned by companies in a similar industry.

Check out our latest analysis for ArtnerLtd

Historical performance is a great place to start when researching a stock so above you can see the gauge for ArtnerLtd's ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of ArtnerLtd.

The Trend Of ROCE

ArtnerLtd deserves to be commended in regards to it's returns. The company has employed 81% more capital in the last five years, and the returns on that capital have remained stable at 31%. With returns that high, it's great that the business can continually reinvest its money at such appealing rates of return. If ArtnerLtd can keep this up, we'd be very optimistic about its future.

The Bottom Line

ArtnerLtd has demonstrated its proficiency by generating high returns on increasing amounts of capital employed, which we're thrilled about. And the stock has done incredibly well with a 192% return over the last five years, so long term investors are no doubt ecstatic with that result. So even though the stock might be more "expensive" than it was before, we think the strong fundamentals warrant this stock for further research.

If you want to continue researching ArtnerLtd, you might be interested to know about the 1 warning sign that our analysis has discovered.

High returns are a key ingredient to strong performance, so check out our free list ofstocks 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.

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