Kyoritsu Maintenance (TSE:9616) Hasn't Managed To Accelerate Its Returns

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. However, after briefly looking over the numbers, we don't think Kyoritsu Maintenance (TSE:9616) 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?

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 Kyoritsu Maintenance is:

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

0.097 = JP¥21b ÷ (JP¥280b - JP¥64b) (Based on the trailing twelve months to December 2024).

Therefore, Kyoritsu Maintenance has an ROCE of 9.7%. Even though it's in line with the industry average of 9.8%, it's still a low return by itself.

See our latest analysis for Kyoritsu Maintenance

In the above chart we have measured Kyoritsu Maintenance'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 Kyoritsu Maintenance .

How Are Returns Trending?

In terms of Kyoritsu Maintenance's historical ROCE trend, it doesn't exactly demand attention. The company has consistently earned 9.7% for the last five years, and the capital employed within the business has risen 40% in that time. 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.

In Conclusion...

As we've seen above, Kyoritsu Maintenance's returns on capital haven't increased but it is reinvesting in the business. Yet to long term shareholders the stock has gifted them an incredible 188% return in the last five years, so the market appears to be rosy about its future. But if the trajectory of these underlying trends continue, we think the likelihood of it being a multi-bagger from here isn't high.

If you want to continue researching Kyoritsu Maintenance, you might be interested to know about the 1 warning sign that our analysis has discovered.

While Kyoritsu Maintenance 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.