Return Trends At Mitsuuroko Group HoldingsLtd (TSE:8131) Aren't Appealing

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. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. In light of that, when we looked at Mitsuuroko Group HoldingsLtd (TSE:8131) and its ROCE trend, we weren't exactly thrilled.

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What Is Return On Capital Employed (ROCE)?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for Mitsuuroko Group HoldingsLtd:

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

0.059 = JP¥7.9b ÷ (JP¥187b - JP¥52b) (Based on the trailing twelve months to December 2024).

So, Mitsuuroko Group HoldingsLtd has an ROCE of 5.9%. On its own that's a low return on capital but it's in line with the industry's average returns of 5.9%.

View our latest analysis for Mitsuuroko Group HoldingsLtd

Historical performance is a great place to start when researching a stock so above you can see the gauge for Mitsuuroko Group HoldingsLtd's ROCE against it's prior returns. If you're interested in investigating Mitsuuroko Group HoldingsLtd's past further, check out this free graph covering Mitsuuroko Group HoldingsLtd's past earnings, revenue and cash flow.

How Are Returns Trending?

The returns on capital haven't changed much for Mitsuuroko Group HoldingsLtd in recent years. The company has employed 32% more capital in the last five years, and the returns on that capital have remained stable at 5.9%. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.

In Conclusion...

As we've seen above, Mitsuuroko Group HoldingsLtd's returns on capital haven't increased but it is reinvesting in the business. Since the stock has gained an impressive 82% over the last five years, investors must think there's better things to come. 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're still interested in Mitsuuroko Group HoldingsLtd it's worth checking out our FREE intrinsic value approximation for 8131 to see if it's trading at an attractive price in other respects.

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.