Aidma Holdings (TSE:7373) Looks To Prolong Its Impressive Returns

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Ergo, when we looked at the ROCE trends at Aidma Holdings (TSE:7373), we liked what we saw.

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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. Analysts use this formula to calculate it for Aidma Holdings:

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

0.39 = JP¥2.9b ÷ (JP¥11b - JP¥3.3b) (Based on the trailing twelve months to May 2025).

Thus, Aidma Holdings has an ROCE of 39%. In absolute terms that's a great return and it's even better than the Commercial Services industry average of 9.8%.

View our latest analysis for Aidma Holdings

Above you can see how the current ROCE for Aidma Holdings 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 Aidma Holdings .

So How Is Aidma Holdings' ROCE Trending?

We'd be pretty happy with returns on capital like Aidma Holdings. The company has consistently earned 39% for the last five years, and the capital employed within the business has risen 1,453% in that time. Now considering ROCE is an attractive 39%, this combination is actually pretty appealing because it means the business can consistently put money to work and generate these high returns. You'll see this when looking at well operated businesses or favorable business models.

On a side note, Aidma Holdings has done well to reduce current liabilities to 31% of total assets over the last five years. This can eliminate some of the risks inherent in the operations because the business has less outstanding obligations to their suppliers and or short-term creditors than they did previously.

In Conclusion...

In the end, the company has proven it can reinvest it's capital at high rates of returns, which you'll remember is a trait of a multi-bagger. Yet over the last three years the stock has declined 26%, so the decline might provide an opening. That's why we think it'd be worthwhile to look further into this stock given the fundamentals are appealing.

One more thing to note, we've identified 1 warning sign with Aidma Holdings and understanding it should be part of your investment process.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high returns on equity.

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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.