Terumo (TSE:4543) Has More To Do To Multiply In Value Going Forward

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base 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. That's why when we briefly looked at Terumo's (TSE:4543) ROCE trend, we were pretty happy with what we saw.

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What Is Return On Capital Employed (ROCE)?

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 Terumo is:

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

0.11 = JP¥176b ÷ (JP¥1.8t - JP¥241b) (Based on the trailing twelve months to March 2025).

So, Terumo has an ROCE of 11%. That's a pretty standard return and it's in line with the industry average of 11%.

View our latest analysis for Terumo

In the above chart we have measured Terumo's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Terumo for free.

The Trend Of ROCE

The trend of ROCE doesn't stand out much, but returns on a whole are decent. The company has consistently earned 11% for the last five years, and the capital employed within the business has risen 54% in that time. 11% is a pretty standard return, and it provides some comfort knowing that Terumo has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

Our Take On Terumo's ROCE

To sum it up, Terumo has simply been reinvesting capital steadily, at those decent rates of return. And given the stock has only risen 30% over the last five years, we'd suspect the market is beginning to recognize these trends. So to determine if Terumo is a multi-bagger going forward, we'd suggest digging deeper into the company's other fundamentals.

Terumo could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation for 4543 on our platform quite valuable.

While Terumo 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.