create restaurants holdings (TSE:3387) Will Want To Turn Around Its Return Trends

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. However, after investigating create restaurants holdings (TSE:3387), we don't think it's current trends fit the mold of a multi-bagger.

What Is Return On Capital Employed (ROCE)?

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 create restaurants holdings:

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

0.076 = JP¥7.1b ÷ (JP¥131b - JP¥38b) (Based on the trailing twelve months to February 2024).

Therefore, create restaurants holdings has an ROCE of 7.6%. On its own, that's a low figure but it's around the 9.1% average generated by the Hospitality industry.

See our latest analysis for create restaurants holdings

Above you can see how the current ROCE for create restaurants holdings compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering create restaurants holdings for free.

What Can We Tell From create restaurants holdings' ROCE Trend?

On the surface, the trend of ROCE at create restaurants holdings doesn't inspire confidence. Around five years ago the returns on capital were 13%, but since then they've fallen to 7.6%. However, given capital employed and revenue have both increased it appears that the business is currently pursuing growth, at the consequence of short term returns. If these investments prove successful, this can bode very well for long term stock performance.

The Key Takeaway

While returns have fallen for create restaurants holdings in recent times, we're encouraged to see that sales are growing and that the business is reinvesting in its operations. Furthermore the stock has climbed 48% over the last five years, it would appear that investors are upbeat about the future. So while the underlying trends could already be accounted for by investors, we still think this stock is worth looking into further.

create restaurants holdings could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation for 3387 on our platform quite valuable.

While create restaurants holdings may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.