There's Been No Shortage Of Growth Recently For Mitsuuroko Group HoldingsLtd's (TSE:8131) Returns On Capital

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. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's 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, Mitsuuroko Group HoldingsLtd (TSE:8131) looks quite promising in regards to its trends of return on capital.

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. 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)

0.10 = JP¥14b ÷ (JP¥181b - JP¥46b) (Based on the trailing twelve months to December 2023).

Therefore, Mitsuuroko Group HoldingsLtd has an ROCE of 10%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Oil and Gas industry average of 8.7%.

See our latest analysis for Mitsuuroko Group HoldingsLtd

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 Mitsuuroko Group HoldingsLtd.

What The Trend Of ROCE Can Tell Us

Investors would be pleased with what's happening at Mitsuuroko Group HoldingsLtd. Over the last five years, returns on capital employed have risen substantially to 10%. The amount of capital employed has increased too, by 35%. So we're very much inspired by what we're seeing at Mitsuuroko Group HoldingsLtd thanks to its ability to profitably reinvest capital.

The Bottom Line

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Mitsuuroko Group HoldingsLtd has. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 91% return over the last five years. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

Before jumping to any conclusions though, we need to know what value we're getting for the current share price. That's where you can check out our FREE intrinsic value estimation for 8131 that compares the share price and estimated value.

While Mitsuuroko Group HoldingsLtd 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.