Returns At Tsukiji Uoichiba Company (TSE:8039) Are On The Way Up

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So when we looked at Tsukiji Uoichiba Company (TSE:8039) and its trend of ROCE, we really liked what we saw.

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What Is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Tsukiji Uoichiba Company:

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

0.025 = JP¥275m ÷ (JP¥19b - JP¥8.6b) (Based on the trailing twelve months to December 2024).

Thus, Tsukiji Uoichiba Company has an ROCE of 2.5%. In absolute terms, that's a low return and it also under-performs the Consumer Retailing industry average of 9.1%.

View our latest analysis for Tsukiji Uoichiba Company

Historical performance is a great place to start when researching a stock so above you can see the gauge for Tsukiji Uoichiba Company's ROCE against it's prior returns. If you're interested in investigating Tsukiji Uoichiba Company's past further, check out this free graph covering Tsukiji Uoichiba Company's past earnings, revenue and cash flow .

How Are Returns Trending?

Shareholders will be relieved that Tsukiji Uoichiba Company has broken into profitability. While the business was unprofitable in the past, it's now turned things around and is earning 2.5% on its capital. On top of that, what's interesting is that the amount of capital being employed has remained steady, so the business hasn't needed to put any additional money to work to generate these higher returns. That being said, while an increase in efficiency is no doubt appealing, it'd be helpful to know if the company does have any investment plans going forward. Because in the end, a business can only get so efficient.

On a separate but related note, it's important to know that Tsukiji Uoichiba Company has a current liabilities to total assets ratio of 44%, which we'd consider pretty high. This effectively means that suppliers (or short-term creditors) are funding a large portion of the business, so just be aware that this can introduce some elements of risk. While it's not necessarily a bad thing, it can be beneficial if this ratio is lower.

Our Take On Tsukiji Uoichiba Company's ROCE

To bring it all together, Tsukiji Uoichiba Company has done well to increase the returns it's generating from its capital employed. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. 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.

One more thing: We've identified 2 warning signs with Tsukiji Uoichiba Company (at least 1 which is a bit unpleasant) , and understanding them would certainly be useful.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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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.