Stock Analysis

Will Ohmura ShigyoLtd (TYO:3953) Multiply In Value Going Forward?

TSE:3953
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What are the early trends we should look for to identify a stock that could multiply in value over the long term? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. However, after briefly looking over the numbers, we don't think Ohmura ShigyoLtd (TYO:3953) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

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. To calculate this metric for Ohmura ShigyoLtd, this is the formula:

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

0.043 = JP¥254m ÷ (JP¥7.2b - JP¥1.3b) (Based on the trailing twelve months to September 2020).

Therefore, Ohmura ShigyoLtd has an ROCE of 4.3%. In absolute terms, that's a low return and it also under-performs the Packaging industry average of 6.6%.

View our latest analysis for Ohmura ShigyoLtd

roce
JASDAQ:3953 Return on Capital Employed December 28th 2020

Historical performance is a great place to start when researching a stock so above you can see the gauge for Ohmura ShigyoLtd's ROCE against it's prior returns. If you'd like to look at how Ohmura ShigyoLtd has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

So How Is Ohmura ShigyoLtd's ROCE Trending?

There hasn't been much to report for Ohmura ShigyoLtd's returns and its level of capital employed because both metrics have been steady for the past five years. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. So unless we see a substantial change at Ohmura ShigyoLtd in terms of ROCE and additional investments being made, we wouldn't hold our breath on it being a multi-bagger.

In Conclusion...

We can conclude that in regards to Ohmura ShigyoLtd's returns on capital employed and the trends, there isn't much change to report on. And investors may be recognizing these trends since the stock has only returned a total of 16% to shareholders over the last five years. Therefore, if you're looking for a multi-bagger, we'd propose looking at other options.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 2 warning signs for Ohmura ShigyoLtd (of which 1 is potentially serious!) that you should know about.

While Ohmura ShigyoLtd may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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This article by Simply Wall St is general in nature. 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.
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