Global-Dining (TSE:7625) Might Have The Makings Of A Multi-Bagger

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? 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 when we looked at Global-Dining (TSE:7625) and its trend of ROCE, we really liked what we saw.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

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. The formula for this calculation on Global-Dining is:

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

0.062 = JP¥511m ÷ (JP¥10b - JP¥1.8b) (Based on the trailing twelve months to September 2025).

Therefore, Global-Dining has an ROCE of 6.2%. In absolute terms, that's a low return and it also under-performs the Hospitality industry average of 10.0%.

View our latest analysis for Global-Dining

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 want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Global-Dining.

How Are Returns Trending?

We're delighted to see that Global-Dining is reaping rewards from its investments and is now generating some pre-tax profits. The company was generating losses five years ago, but now it's earning 6.2% which is a sight for sore eyes. In addition to that, Global-Dining is employing 128% more capital than previously which is expected of a company that's trying to break into profitability. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

On a related note, the company's ratio of current liabilities to total assets has decreased to 18%, which basically reduces it's funding from the likes of short-term creditors or suppliers. Therefore we can rest assured that the growth in ROCE is a result of the business' fundamental improvements, rather than a cooking class featuring this company's books.

What We Can Learn From Global-Dining's ROCE

Long story short, we're delighted to see that Global-Dining's reinvestment activities have paid off and the company is now profitable. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. In light of that, we think it's worth looking further into this stock because if Global-Dining can keep these trends up, it could have a bright future ahead.

One more thing, we've spotted 2 warning signs facing Global-Dining that you might find interesting.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.