Here's What To Make Of KURADASHI.Co.Ltd's (TSE:5884) Decelerating Rates Of Return

There are a few key trends to look for if we want to identify the next multi-bagger. 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. However, after investigating KURADASHI.Co.Ltd (TSE:5884), we don't think it's current trends fit the mold of a multi-bagger.

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What Is 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. The formula for this calculation on KURADASHI.Co.Ltd is:

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

0.00043 = JP¥1.0m ÷ (JP¥3.1b - JP¥705m) (Based on the trailing twelve months to September 2025).

Thus, KURADASHI.Co.Ltd has an ROCE of 0.04%. Ultimately, that's a low return and it under-performs the Consumer Retailing industry average of 9.2%.

See our latest analysis for KURADASHI.Co.Ltd

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how KURADASHI.Co.Ltd has performed in the past in other metrics, you can view this free graph of KURADASHI.Co.Ltd's past earnings, revenue and cash flow.

What Can We Tell From KURADASHI.Co.Ltd's ROCE Trend?

There hasn't been much to report for KURADASHI.Co.Ltd's returns and its level of capital employed because both metrics have been steady for the past . This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. With that in mind, unless investment picks up again in the future, we wouldn't expect KURADASHI.Co.Ltd to be a multi-bagger going forward.

The Key Takeaway

In a nutshell, KURADASHI.Co.Ltd has been trudging along with the same returns from the same amount of capital over the last . Although the market must be expecting these trends to improve because the stock has gained 38% over the last year. Ultimately, if the underlying trends persist, we wouldn't hold our breath on it being a multi-bagger going forward.

One more thing, we've spotted 3 warning signs facing KURADASHI.Co.Ltd that you might find interesting.

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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.