SaizeriyaLtd (TSE:7581) Might Have The Makings Of A Multi-Bagger

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount 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. So on that note, SaizeriyaLtd (TSE:7581) looks quite promising in regards to its trends of return on capital.

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What Is Return On Capital Employed (ROCE)?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on SaizeriyaLtd is:

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

0.11 = JP¥15b ÷ (JP¥176b - JP¥35b) (Based on the trailing twelve months to May 2025).

Thus, SaizeriyaLtd has an ROCE of 11%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Hospitality industry average of 9.5%.

See our latest analysis for SaizeriyaLtd

In the above chart we have measured SaizeriyaLtd's 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 SaizeriyaLtd .

How Are Returns Trending?

The trends we've noticed at SaizeriyaLtd are quite reassuring. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 11%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 49%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

Our Take On SaizeriyaLtd's ROCE

To sum it up, SaizeriyaLtd has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. Therefore, we think it would be worth your time to check if these trends are going to continue.

While SaizeriyaLtd looks impressive, no company is worth an infinite price. The intrinsic value infographic for 7581 helps visualize whether it is currently trading for a fair price.

While SaizeriyaLtd 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.