What Do The Returns At Gamecard-Joyco HoldingsInc (TYO:6249) Mean Going Forward?

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Speaking of which, we noticed some great changes in Gamecard-Joyco HoldingsInc's (TYO:6249) returns on capital, so let's have a look.

Return On Capital Employed (ROCE): What is it?

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. To calculate this metric for Gamecard-Joyco HoldingsInc, this is the formula:

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

0.022 = JP¥948m ÷ (JP¥46b - JP¥3.5b) (Based on the trailing twelve months to September 2020).

So, Gamecard-Joyco HoldingsInc has an ROCE of 2.2%. Ultimately, that's a low return and it under-performs the Hospitality industry average of 7.5%.

Check out 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.

What Can We Tell From Gamecard-Joyco HoldingsInc's ROCE Trend?

Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 99% in that same time. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. It's worth looking deeper into this though because while it's great that the business is more efficient, it might also mean that going forward the areas to invest internally for the organic growth are lacking.

What We Can Learn From 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 since the stock has fallen 15% over the last five years, there might be an opportunity here. So researching this company further and determining whether or not these trends will continue seems justified.

Like most companies, Gamecard-Joyco HoldingsInc does come with some risks, and we've found 2 warning signs that you should be aware of.

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.

If you’re looking to trade Gamecard-Joyco HoldingsInc, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

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