Aidma Holdings (TSE:7373) Might Become A Compounding Machine

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. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing 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. 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)

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 Aidma Holdings, this is the formula:

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

0.42 = JP¥3.1b ÷ (JP¥11b - JP¥3.6b) (Based on the trailing twelve months to August 2025).

Therefore, Aidma Holdings has an ROCE of 42%. In absolute terms that's a great return and it's even better than the Commercial Services industry average of 9.5%.

See 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'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Aidma Holdings .

So How Is Aidma Holdings' ROCE Trending?

In terms of Aidma Holdings' history of ROCE, it's quite impressive. The company has employed 1,319% more capital in the last five years, and the returns on that capital have remained stable at 42%. Returns like this are the envy of most businesses and given it has repeatedly reinvested at these rates, that's even better. 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 33% of total assets over the last five years. Effectively suppliers now fund less of the business, which can lower some elements of risk.

In Conclusion...

In summary, we're delighted to see that Aidma Holdings has been compounding returns by reinvesting at consistently high rates of return, as these are common traits of a multi-bagger. However, despite the favorable fundamentals, the stock has fallen 35% over the last three years, so there might be an opportunity here for astute investors. That's why we think it'd be worthwhile to look further into this stock given the fundamentals are appealing.

Aidma Holdings does have some risks though, and we've spotted 1 warning sign for Aidma Holdings that you might be interested in.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.

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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.