We Like These Underlying Return On Capital Trends At Gamecard-Joyco HoldingsInc (TYO:6249)

If you're looking for a multi-bagger, there's a few things to keep an eye out for. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing 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. With that in mind, we've noticed some promising trends at Gamecard-Joyco HoldingsInc (TYO:6249) so let's look a bit deeper.

What is Return On Capital Employed (ROCE)?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for Gamecard-Joyco HoldingsInc:

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

0.024 = JP¥1.0b ÷ (JP¥46b - JP¥3.6b) (Based on the trailing twelve months to December 2020).

So, Gamecard-Joyco HoldingsInc has an ROCE of 2.4%. Ultimately, that's a low return and it under-performs the Hospitality industry average of 7.5%.

See our latest analysis for Gamecard-Joyco HoldingsInc

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

The Trend Of ROCE

We're delighted to see that Gamecard-Joyco HoldingsInc is reaping rewards from its investments and has now broken into profitability. While the business was unprofitable in the past, it's now turned things around and is earning 2.4% on its capital. While returns have increased, the amount of capital employed by Gamecard-Joyco HoldingsInc has remained flat over the period. 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.

The Bottom Line On Gamecard-Joyco HoldingsInc's ROCE

To sum it up, Gamecard-Joyco HoldingsInc is collecting higher returns from the same amount of capital, and that's impressive. And given the stock has remained rather flat over the last five years, there might be an opportunity here if other metrics are strong. So researching this company further and determining whether or not these trends will continue seems justified.

If you want to continue researching Gamecard-Joyco HoldingsInc, you might be interested to know about the 1 warning sign that our analysis has discovered.

While Gamecard-Joyco HoldingsInc 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. 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.
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