Lifedrink Company (TSE:2585) Is Reinvesting To Multiply In Value

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. That's why when we briefly looked at Lifedrink Company's (TSE:2585) ROCE trend, we were very happy with what we saw.

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Understanding Return On Capital Employed (ROCE)

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on Lifedrink Company is:

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

0.21 = JP¥4.7b ÷ (JP¥33b - JP¥11b) (Based on the trailing twelve months to March 2025).

So, Lifedrink Company has an ROCE of 21%. In absolute terms that's a great return and it's even better than the Beverage industry average of 7.5%.

View our latest analysis for Lifedrink Company

In the above chart we have measured Lifedrink Company'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 Lifedrink Company .

What The Trend Of ROCE Can Tell Us

In terms of Lifedrink Company's history of ROCE, it's quite impressive. Over the past two years, ROCE has remained relatively flat at around 21% and the business has deployed 63% more capital into its operations. Now considering ROCE is an attractive 21%, this combination is actually pretty appealing because it means the business can consistently put money to work and generate these high returns. If these trends can continue, it wouldn't surprise us if the company became a multi-bagger.

The Bottom Line

Lifedrink Company has demonstrated its proficiency by generating high returns on increasing amounts of capital employed, which we're thrilled about. And long term investors would be thrilled with the 396% return they've received over the last three years. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

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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.