The Returns At Kobe Bussan (TSE:3038) Aren't Growing

What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So, when we ran our eye over Kobe Bussan's (TSE:3038) trend of ROCE, we liked what we saw.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

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. The formula for this calculation on Kobe Bussan is:

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

0.19 = JP¥35b ÷ (JP¥244b - JP¥58b) (Based on the trailing twelve months to April 2025).

Therefore, Kobe Bussan has an ROCE of 19%. In absolute terms, that's a satisfactory return, but compared to the Consumer Retailing industry average of 9.2% it's much better.

Check out our latest analysis for Kobe Bussan

In the above chart we have measured Kobe Bussan's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Kobe Bussan for free.

What Does the ROCE Trend For Kobe Bussan Tell Us?

The trend of ROCE doesn't stand out much, but returns on a whole are decent. The company has employed 62% more capital in the last five years, and the returns on that capital have remained stable at 19%. Since 19% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

The Key Takeaway

In the end, Kobe Bussan has proven its ability to adequately reinvest capital at good rates of return. However, over the last five years, the stock has only delivered a 29% return to shareholders who held over that period. That's why it could be worth your time looking into this stock further to discover if it has more traits of a multi-bagger.

Kobe Bussan could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation for 3038 on our platform quite valuable.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.