Japan Animal Referral Medical Center (TSE:6039) Is Doing The Right Things To Multiply Its Share Price

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Speaking of which, we noticed some great changes in Japan Animal Referral Medical Center's (TSE:6039) returns on capital, so let's have a look.

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What Is 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 Japan Animal Referral Medical Center is:

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

0.12 = JP¥831m ÷ (JP¥9.1b - JP¥1.9b) (Based on the trailing twelve months to June 2025).

Therefore, Japan Animal Referral Medical Center has an ROCE of 12%. On its own, that's a standard return, however it's much better than the 8.7% generated by the Healthcare industry.

See our latest analysis for Japan Animal Referral Medical Center

Above you can see how the current ROCE for Japan Animal Referral Medical Center compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Japan Animal Referral Medical Center .

So How Is Japan Animal Referral Medical Center's ROCE Trending?

We like the trends that we're seeing from Japan Animal Referral Medical Center. The data shows that returns on capital have increased substantially over the last five years to 12%. Basically the business is earning more per dollar of capital invested and in addition to that, 48% more capital is being employed now too. So we're very much inspired by what we're seeing at Japan Animal Referral Medical Center thanks to its ability to profitably reinvest capital.

What We Can Learn From Japan Animal Referral Medical Center's ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Japan Animal Referral Medical Center has. Since the stock has returned a solid 94% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

One final note, you should learn about the 3 warning signs we've spotted with Japan Animal Referral Medical Center (including 1 which can't be ignored) .

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.