SHUEI YOBIKO (TSE:4678) 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? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount 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. Although, when we looked at SHUEI YOBIKO (TSE:4678), it didn't seem to tick all of these boxes.

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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 SHUEI YOBIKO, this is the formula:

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

0.055 = JP¥378m ÷ (JP¥9.2b - JP¥2.3b) (Based on the trailing twelve months to December 2024).

Thus, SHUEI YOBIKO has an ROCE of 5.5%. In absolute terms, that's a low return and it also under-performs the Consumer Services industry average of 9.1%.

Check out our latest analysis for SHUEI YOBIKO

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

What Can We Tell From SHUEI YOBIKO's ROCE Trend?

Over the past five years, SHUEI YOBIKO's ROCE and capital employed have both remained mostly flat. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. With that in mind, unless investment picks up again in the future, we wouldn't expect SHUEI YOBIKO to be a multi-bagger going forward.

The Key Takeaway

In summary, SHUEI YOBIKO isn't compounding its earnings but is generating stable returns on the same amount of capital employed. And investors appear hesitant that the trends will pick up because the stock has fallen 24% in the last five years. On the whole, we aren't too inspired by the underlying trends and we think there may be better chances of finding a multi-bagger elsewhere.

If you'd like to know more about SHUEI YOBIKO, we've spotted 3 warning signs, and 1 of them shouldn't be ignored.

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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.