Nisshin Seifun Group (TSE:2002) Is Doing The Right Things To Multiply Its Share Price

What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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. So on that note, Nisshin Seifun Group (TSE:2002) looks quite promising in regards to its trends of return on capital.

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. To calculate this metric for Nisshin Seifun Group, this is the formula:

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

0.068 = JP¥45b ÷ (JP¥830b - JP¥158b) (Based on the trailing twelve months to December 2024).

So, Nisshin Seifun Group has an ROCE of 6.8%. Even though it's in line with the industry average of 7.0%, it's still a low return by itself.

View our latest analysis for Nisshin Seifun Group

In the above chart we have measured Nisshin Seifun Group's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Nisshin Seifun Group .

How Are Returns Trending?

Nisshin Seifun Group has not disappointed with their ROCE growth. The figures show that over the last five years, ROCE has grown 36% whilst employing roughly the same amount of capital. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

The Key Takeaway

To bring it all together, Nisshin Seifun Group has done well to increase the returns it's generating from its capital employed. Investors may not be impressed by the favorable underlying trends yet because over the last five years the stock has only returned 28% to shareholders. Given that, we'd look further into this stock in case it has more traits that could make it multiply in the long term.

On the other side of ROCE, we have to consider valuation. That's why we have a FREE intrinsic value estimation for 2002 on our platform that is definitely worth checking out.

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.

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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.