Returns On Capital At Koshidaka Holdings (TSE:2157) Have Hit The Brakes

There are a few key trends to look for if we want to identify the next multi-bagger. 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. In light of that, when we looked at Koshidaka Holdings (TSE:2157) and its ROCE trend, we weren't exactly thrilled.

Understanding 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. The formula for this calculation on Koshidaka Holdings is:

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

0.19 = JP¥8.7b ÷ (JP¥60b - JP¥13b) (Based on the trailing twelve months to May 2024).

Therefore, Koshidaka Holdings has an ROCE of 19%. On its own, that's a standard return, however it's much better than the 9.8% generated by the Hospitality industry.

See our latest analysis for Koshidaka Holdings

In the above chart we have measured Koshidaka Holdings' prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Koshidaka Holdings .

So How Is Koshidaka Holdings' ROCE Trending?

Over the past five years, Koshidaka Holdings' ROCE and capital employed have both remained mostly flat. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. So don't be surprised if Koshidaka Holdings doesn't end up being a multi-bagger in a few years time.

In Conclusion...

In a nutshell, Koshidaka Holdings has been trudging along with the same returns from the same amount of capital over the last five years. And investors appear hesitant that the trends will pick up because the stock has fallen 25% in the last five years. Therefore based on the analysis done in this article, we don't think Koshidaka Holdings has the makings of a multi-bagger.

Koshidaka Holdings does have some risks though, and we've spotted 2 warning signs for Koshidaka Holdings that you might be interested in.

While Koshidaka Holdings 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. 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.