The Return Trends At Tsuburaya Fields Holdings (TSE:2767) Look Promising

To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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 on that note, Tsuburaya Fields Holdings (TSE:2767) looks quite promising in regards to its trends of return on capital.

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

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. To calculate this metric for Tsuburaya Fields Holdings, this is the formula:

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

0.17 = JP¥12b ÷ (JP¥98b - JP¥31b) (Based on the trailing twelve months to March 2024).

Thus, Tsuburaya Fields Holdings has an ROCE of 17%. On its own, that's a standard return, however it's much better than the 12% generated by the Leisure industry.

Check out our latest analysis for Tsuburaya Fields Holdings

In the above chart we have measured Tsuburaya Fields Holdings' prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Tsuburaya Fields Holdings .

What Does the ROCE Trend For Tsuburaya Fields Holdings Tell Us?

We're delighted to see that Tsuburaya Fields Holdings is reaping rewards from its investments and is now generating some pre-tax profits. The company was generating losses five years ago, but now it's earning 17% which is a sight for sore eyes. Not only that, but the company is utilizing 47% more capital than before, but that's to be expected from a company trying to break into profitability. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, both common traits of a multi-bagger.

What We Can Learn From Tsuburaya Fields Holdings' ROCE

To the delight of most shareholders, Tsuburaya Fields Holdings has now broken into profitability. And a remarkable 683% total return over the last five years tells us that investors are expecting more good things to come in the future. Therefore, we think it would be worth your time to check if these trends are going to continue.

On a final note, we found 3 warning signs for Tsuburaya Fields Holdings (1 is significant) you should be aware of.

While Tsuburaya Fields Holdings may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list 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.

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