Slowing Rates Of Return At FUJITA CORPORATIONLtd (TSE:3370) Leave Little Room For Excitement

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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. Having said that, from a first glance at FUJITA CORPORATIONLtd (TSE:3370) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

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. To calculate this metric for FUJITA CORPORATIONLtd, this is the formula:

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

0.045 = JP¥94m ÷ (JP¥2.8b - JP¥736m) (Based on the trailing twelve months to March 2024).

So, FUJITA CORPORATIONLtd has an ROCE of 4.5%. In absolute terms, that's a low return and it also under-performs the Hospitality industry average of 9.6%.

Check out our latest analysis for FUJITA CORPORATIONLtd

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you're interested in investigating FUJITA CORPORATIONLtd's past further, check out this free graph covering FUJITA CORPORATIONLtd's past earnings, revenue and cash flow.

How Are Returns Trending?

There hasn't been much to report for FUJITA CORPORATIONLtd's returns and its level of capital employed because both metrics have been steady for the past . 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 don't be surprised if FUJITA CORPORATIONLtd doesn't end up being a multi-bagger in a few years time.

Our Take 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. It seems that investors have little hope of these trends getting any better and that may have partly contributed to the stock collapsing 81% in the last five years. Therefore based on the analysis done in this article, we don't think FUJITA CORPORATIONLtd has the makings of a multi-bagger.

FUJITA CORPORATIONLtd does have some risks, we noticed 6 warning signs (and 2 which are concerning) we think you should know about.

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.

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