United Super Markets Holdings (TSE:3222) Might Be Having Difficulty Using Its Capital Effectively

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. 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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Having said that, from a first glance at United Super Markets Holdings (TSE:3222) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

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Understanding Return On Capital Employed (ROCE)

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. Analysts use this formula to calculate it for United Super Markets Holdings:

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

0.026 = JP¥6.7b ÷ (JP¥389b - JP¥130b) (Based on the trailing twelve months to May 2025).

Therefore, United Super Markets Holdings has an ROCE of 2.6%. Ultimately, that's a low return and it under-performs the Consumer Retailing industry average of 10.0%.

See our latest analysis for United Super Markets Holdings

Above you can see how the current ROCE for United Super Markets Holdings compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for United Super Markets Holdings .

How Are Returns Trending?

In terms of United Super Markets Holdings' historical ROCE movements, the trend isn't fantastic. To be more specific, ROCE has fallen from 8.5% over the last five years. However, given capital employed and revenue have both increased it appears that the business is currently pursuing growth, at the consequence of short term returns. And if the increased capital generates additional returns, the business, and thus shareholders, will benefit in the long run.

What We Can Learn From United Super Markets Holdings' ROCE

While returns have fallen for United Super Markets Holdings in recent times, we're encouraged to see that sales are growing and that the business is reinvesting in its operations. However, despite the promising trends, the stock has fallen 16% over the last five years, so there might be an opportunity here for astute investors. As a result, we'd recommend researching this stock further to uncover what other fundamentals of the business can show us.

Like most companies, United Super Markets Holdings does come with some risks, and we've found 2 warning signs that you should be aware of.

While United Super Markets 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.