We Like These Underlying Return On Capital Trends At As PartnersLTD (TSE:160A)

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So when we looked at As PartnersLTD (TSE:160A) and its trend of ROCE, we really liked 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. Analysts use this formula to calculate it for As PartnersLTD:

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

0.15 = JP¥1.5b ÷ (JP¥20b - JP¥11b) (Based on the trailing twelve months to December 2024).

So, As PartnersLTD has an ROCE of 15%. In absolute terms, that's a satisfactory return, but compared to the Healthcare industry average of 8.7% it's much better.

See our latest analysis for As PartnersLTD

Above you can see how the current ROCE for As PartnersLTD 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 As PartnersLTD .

What Can We Tell From As PartnersLTD's ROCE Trend?

The trends we've noticed at As PartnersLTD are quite reassuring. The numbers show that in the last one year, the returns generated on capital employed have grown considerably to 15%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 46%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

On a separate but related note, it's important to know that As PartnersLTD has a current liabilities to total assets ratio of 52%, which we'd consider pretty high. This effectively means that suppliers (or short-term creditors) are funding a large portion of the business, so just be aware that this can introduce some elements of risk. Ideally we'd like to see this reduce as that would mean fewer obligations bearing risks.

What We Can Learn From As PartnersLTD's ROCE

All in all, it's terrific to see that As PartnersLTD is reaping the rewards from prior investments and is growing its capital base. Given the stock has declined 16% in the last year, this could be a good investment if the valuation and other metrics are also appealing. With that in mind, we believe the promising trends warrant this stock for further investigation.

On a separate note, we've found 1 warning sign for As PartnersLTD you'll probably want to know about.

While As PartnersLTD 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.