Coca-Cola Bottlers Japan Holdings (TSE:2579) Has More To Do To Multiply In Value Going Forward

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Although, when we looked at Coca-Cola Bottlers Japan Holdings (TSE:2579), it didn't seem to tick all of these boxes.

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 Coca-Cola Bottlers Japan Holdings is:

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

0.019 = JP¥12b ÷ (JP¥808b - JP¥155b) (Based on the trailing twelve months to September 2024).

Therefore, Coca-Cola Bottlers Japan Holdings has an ROCE of 1.9%. Ultimately, that's a low return and it under-performs the Beverage industry average of 7.4%.

View our latest analysis for Coca-Cola Bottlers Japan Holdings

Above you can see how the current ROCE for Coca-Cola Bottlers Japan Holdings compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Coca-Cola Bottlers Japan Holdings .

What Can We Tell From Coca-Cola Bottlers Japan Holdings' ROCE Trend?

Things have been pretty stable at Coca-Cola Bottlers Japan Holdings, with its capital employed and returns on that capital staying somewhat the same for the last five years. It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. With that in mind, unless investment picks up again in the future, we wouldn't expect Coca-Cola Bottlers Japan Holdings to be a multi-bagger going forward.

In Conclusion...

In a nutshell, Coca-Cola Bottlers Japan Holdings has been trudging along with the same returns from the same amount of capital over the last five years. Unsurprisingly, the stock has only gained 3.0% over the last five years, which potentially indicates that investors are accounting for this going forward. As a result, if you're hunting for a multi-bagger, we think you'd have more luck elsewhere.

One more thing to note, we've identified 2 warning signs with Coca-Cola Bottlers Japan Holdings and understanding these should be part of your investment process.

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.