Under The Bonnet, Tsuburaya Fields Holdings' (TSE:2767) Returns Look Impressive

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, 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. Speaking of which, we noticed some great changes in Tsuburaya Fields Holdings' (TSE:2767) returns on capital, so let's have a look.

What Is Return On Capital Employed (ROCE)?

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. 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)

0.20 = JP¥12b ÷ (JP¥89b - JP¥29b) (Based on the trailing twelve months to June 2024).

So, Tsuburaya Fields Holdings has an ROCE of 20%. In absolute terms that's a great return and it's even better than the Leisure industry average of 14%.

View 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're interested, you can view the analysts predictions in our free analyst report for Tsuburaya Fields Holdings .

The Trend Of ROCE

The trends we've noticed at Tsuburaya Fields Holdings are quite reassuring. Over the last five years, returns on capital employed have risen substantially to 20%. Basically the business is earning more per dollar of capital invested and in addition to that, 37% more capital is being employed now too. So we're very much inspired by what we're seeing at Tsuburaya Fields Holdings thanks to its ability to profitably reinvest capital.

Our Take On Tsuburaya Fields Holdings' ROCE

All in all, it's terrific to see that Tsuburaya Fields Holdings is reaping the rewards from prior investments and is growing its capital base. And a remarkable 810% total return over the last five years tells us that investors are expecting more good things to come in the future. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

Tsuburaya Fields Holdings does have some risks, we noticed 3 warning signs (and 2 which don't sit too well with us) we think you should know about.

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.