Returns On Capital At Nippon Chemical Industrial (TSE:4092) Have Hit The Brakes

There are a few key trends to look for if we want to identify the next multi-bagger. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. However, after briefly looking over the numbers, we don't think Nippon Chemical Industrial (TSE:4092) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

What Is Return On Capital Employed (ROCE)?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. To calculate this metric for Nippon Chemical Industrial, this is the formula:

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

0.049 = JP¥2.7b ÷ (JP¥76b - JP¥21b) (Based on the trailing twelve months to June 2025).

Thus, Nippon Chemical Industrial has an ROCE of 4.9%. Ultimately, that's a low return and it under-performs the Chemicals industry average of 7.1%.

See our latest analysis for Nippon Chemical Industrial

In the above chart we have measured Nippon Chemical Industrial'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 Nippon Chemical Industrial for free.

What Can We Tell From Nippon Chemical Industrial's ROCE Trend?

Over the past five years, Nippon Chemical Industrial's ROCE and capital employed have both remained mostly flat. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. So unless we see a substantial change at Nippon Chemical Industrial in terms of ROCE and additional investments being made, we wouldn't hold our breath on it being a multi-bagger.

What We Can Learn From Nippon Chemical Industrial's ROCE

We can conclude that in regards to Nippon Chemical Industrial's returns on capital employed and the trends, there isn't much change to report on. Unsurprisingly, the stock has only gained 27% over the last five years, which potentially indicates that investors are accounting for this going forward. So if you're looking for a multi-bagger, the underlying trends indicate you may have better chances elsewhere.

If you want to continue researching Nippon Chemical Industrial, you might be interested to know about the 2 warning signs that our analysis has discovered.

While Nippon Chemical Industrial 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.