IBOKINLtd (TSE:5699) Shareholders Will Want The ROCE Trajectory To Continue

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, 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 IBOKINLtd (TSE:5699) and its trend of ROCE, we really liked what we saw.

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Return On Capital Employed (ROCE): What Is It?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for IBOKINLtd:

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

0.16 = JP¥798m ÷ (JP¥6.3b - JP¥1.4b) (Based on the trailing twelve months to December 2024).

So, IBOKINLtd has an ROCE of 16%. On its own, that's a standard return, however it's much better than the 9.8% generated by the Commercial Services industry.

Check out our latest analysis for IBOKINLtd

Historical performance is a great place to start when researching a stock so above you can see the gauge for IBOKINLtd's ROCE against it's prior returns. If you're interested in investigating IBOKINLtd's past further, check out this free graph covering IBOKINLtd's past earnings, revenue and cash flow .

So How Is IBOKINLtd's ROCE Trending?

Investors would be pleased with what's happening at IBOKINLtd. The data shows that returns on capital have increased substantially over the last five years to 16%. Basically the business is earning more per dollar of capital invested and in addition to that, 39% more capital is being employed now too. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

Our Take On IBOKINLtd's ROCE

To sum it up, IBOKINLtd 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 solid 41% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

Like most companies, IBOKINLtd does come with some risks, and we've found 1 warning sign that you should be aware of.

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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.