Investors Met With Slowing Returns on Capital At Panasonic Holdings (TSE:6752)

If you're looking for a multi-bagger, there's a few things to keep an eye out for. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Although, when we looked at Panasonic Holdings (TSE:6752), it didn't seem to tick all of these boxes.

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

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Panasonic Holdings is:

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

0.062 = JP¥407b ÷ (JP¥9.3t - JP¥2.7t) (Based on the trailing twelve months to June 2025).

So, Panasonic Holdings has an ROCE of 6.2%. In absolute terms, that's a low return but it's around the Consumer Durables industry average of 7.1%.

Check out our latest analysis for Panasonic Holdings

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

What Does the ROCE Trend For Panasonic Holdings Tell Us?

There are better returns on capital out there than what we're seeing at Panasonic Holdings. Over the past five years, ROCE has remained relatively flat at around 6.2% and the business has deployed 81% more capital into its operations. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.

On a side note, Panasonic Holdings has done well to reduce current liabilities to 29% 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 conclusion, Panasonic Holdings has been investing more capital into the business, but returns on that capital haven't increased. Since the stock has gained an impressive 79% over the last five years, investors must think there's better things to come. But if the trajectory of these underlying trends continue, we think the likelihood of it being a multi-bagger from here isn't high.

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

While Panasonic Holdings isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.