Mitani Sekisan's (TSE:5273) Returns Have Hit A Wall

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. With that in mind, the ROCE of Mitani Sekisan (TSE:5273) looks decent, right now, so lets see what the trend of returns can tell us.

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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 Mitani Sekisan is:

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

0.14 = JP¥14b ÷ (JP¥125b - JP¥24b) (Based on the trailing twelve months to March 2025).

So, Mitani Sekisan has an ROCE of 14%. In absolute terms, that's a satisfactory return, but compared to the Basic Materials industry average of 7.7% it's much better.

See our latest analysis for Mitani Sekisan

Historical performance is a great place to start when researching a stock so above you can see the gauge for Mitani Sekisan's ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Mitani Sekisan.

What Does the ROCE Trend For Mitani Sekisan Tell Us?

While the returns on capital are good, they haven't moved much. The company has consistently earned 14% for the last five years, and the capital employed within the business has risen 47% in that time. 14% is a pretty standard return, and it provides some comfort knowing that Mitani Sekisan has consistently earned this amount. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

In Conclusion...

The main thing to remember is that Mitani Sekisan has proven its ability to continually reinvest at respectable rates of return. And the stock has followed suit returning a meaningful 57% to shareholders over the last five years. So while the positive underlying trends may be accounted for by investors, we still think this stock is worth looking into further.

If you're still interested in Mitani Sekisan it's worth checking out our FREE intrinsic value approximation for 5273 to see if it's trading at an attractive price in other respects.

While Mitani Sekisan 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. 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.