HamayuuLtd (TSE:7682) Has More To Do To Multiply In Value Going Forward

There are a few key trends to look for if we want to identify the next multi-bagger. 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. However, after investigating HamayuuLtd (TSE:7682), we don't think it's current trends fit the mold of a multi-bagger.

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Return On Capital Employed (ROCE): What Is It?

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. Analysts use this formula to calculate it for HamayuuLtd:

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

0.053 = JP¥182m ÷ (JP¥4.5b - JP¥1.1b) (Based on the trailing twelve months to January 2025).

Thus, HamayuuLtd has an ROCE of 5.3%. In absolute terms, that's a low return and it also under-performs the Hospitality industry average of 9.8%.

View our latest analysis for HamayuuLtd

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

What The Trend Of ROCE Can Tell Us

The returns on capital haven't changed much for HamayuuLtd in recent years. Over the past five years, ROCE has remained relatively flat at around 5.3% and the business has deployed 26% more capital into its operations. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

What We Can Learn From HamayuuLtd's ROCE

As we've seen above, HamayuuLtd's returns on capital haven't increased but it is reinvesting in the business. Investors must think there's better things to come because the stock has knocked it out of the park, delivering a 440% gain to shareholders who have held over the last five years. Ultimately, if the underlying trends persist, we wouldn't hold our breath on it being a multi-bagger going forward.

On a separate note, we've found 2 warning signs for HamayuuLtd you'll probably want to know about.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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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.