CURVES HOLDINGS (TSE:7085) Hasn't Managed To Accelerate Its Returns

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. However, after briefly looking over the numbers, we don't think CURVES HOLDINGS (TSE:7085) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

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 CURVES HOLDINGS:

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

0.15 = JP¥4.3b ÷ (JP¥39b - JP¥11b) (Based on the trailing twelve months to November 2023).

So, CURVES HOLDINGS has an ROCE of 15%. In absolute terms, that's a satisfactory return, but compared to the Hospitality industry average of 8.9% it's much better.

Check out our latest analysis for CURVES HOLDINGS

In the above chart we have measured CURVES 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 CURVES HOLDINGS .

What The Trend Of ROCE Can Tell Us

There hasn't been much to report for CURVES HOLDINGS' returns and its level of capital employed because both metrics have been steady for the past five years. 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. With that in mind, unless investment picks up again in the future, we wouldn't expect CURVES HOLDINGS to be a multi-bagger going forward.

The Bottom Line On CURVES HOLDINGS' ROCE

In a nutshell, CURVES HOLDINGS has been trudging along with the same returns from the same amount of capital over the last five years. And in the last three years, the stock has given away 16% 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.

CURVES HOLDINGS could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation for 7085 on our platform quite valuable.

While CURVES 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.