Returns At Mitani Sekisan (TSE:5273) Are On The Way Up

There are a few key trends to look for if we want to identify the next multi-bagger. 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. Speaking of which, we noticed some great changes in Mitani Sekisan's (TSE:5273) returns on capital, so let's have a look.

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What Is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed 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¥123b - JP¥24b) (Based on the trailing twelve months to December 2024).

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 8.0% it's much better.

View 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're interested in investigating Mitani Sekisan's past further, check out this free graph covering Mitani Sekisan's past earnings, revenue and cash flow.

What Does the ROCE Trend For Mitani Sekisan Tell Us?

We like the trends that we're seeing from Mitani Sekisan. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 14%. The amount of capital employed has increased too, by 40%. So we're very much inspired by what we're seeing at Mitani Sekisan thanks to its ability to profitably reinvest capital.

The Bottom Line

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 Mitani Sekisan has. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 52% return over the last five years. Therefore, we think it would be worth your time to check if these trends are going to continue.

If you want to continue researching Mitani Sekisan, you might be interested to know about the 1 warning sign that our analysis has discovered.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high 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.