FUJITA CORPORATIONLtd (TSE:3370) Has Some Way To Go To Become A Multi-Bagger

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. In light of that, when we looked at FUJITA CORPORATIONLtd (TSE:3370) and its ROCE trend, we weren't exactly thrilled.

Return On Capital Employed (ROCE): What Is It?

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 FUJITA CORPORATIONLtd:

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

0.052 = JP¥103m ÷ (JP¥2.7b - JP¥758m) (Based on the trailing twelve months to September 2024).

Therefore, FUJITA CORPORATIONLtd has an ROCE of 5.2%. Ultimately, that's a low return and it under-performs the Hospitality industry average of 10.0%.

Check out our latest analysis for FUJITA CORPORATIONLtd

Historical performance is a great place to start when researching a stock so above you can see the gauge for FUJITA CORPORATIONLtd's ROCE against it's prior returns. If you'd like to look at how FUJITA CORPORATIONLtd has performed in the past in other metrics, you can view this free graph of FUJITA CORPORATIONLtd's past earnings, revenue and cash flow.

How Are Returns Trending?

Things have been pretty stable at FUJITA CORPORATIONLtd, with its capital employed and returns on that capital staying somewhat the same for the last . It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. So unless we see a substantial change at FUJITA CORPORATIONLtd in terms of ROCE and additional investments being made, we wouldn't hold our breath on it being a multi-bagger.

The Bottom Line On FUJITA CORPORATIONLtd's ROCE

We can conclude that in regards to FUJITA CORPORATIONLtd's returns on capital employed and the trends, there isn't much change to report on. And in the last five years, the stock has given away 68% so the market doesn't look too hopeful on these trends strengthening any time soon. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere.

If you'd like to know more about FUJITA CORPORATIONLtd, we've spotted 5 warning signs, and 2 of them don't sit too well with us.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high 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.