PR TIMES (TSE:3922) Is Aiming To Keep Up Its Impressive Returns

If you're looking for a multi-bagger, there's a few things to keep an eye out 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Ergo, when we looked at the ROCE trends at PR TIMES (TSE:3922), we liked what we saw.

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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. To calculate this metric for PR TIMES, this is the formula:

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

0.27 = JP¥1.8b ÷ (JP¥7.8b - JP¥1.1b) (Based on the trailing twelve months to November 2024).

Thus, PR TIMES has an ROCE of 27%. In absolute terms that's a great return and it's even better than the Interactive Media and Services industry average of 15%.

See our latest analysis for PR TIMES

In the above chart we have measured PR TIMES' 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 PR TIMES for free.

What The Trend Of ROCE Can Tell Us

It's hard not to be impressed by PR TIMES' returns on capital. The company has consistently earned 27% for the last five years, and the capital employed within the business has risen 257% in that time. Returns like this are the envy of most businesses and given it has repeatedly reinvested at these rates, that's even better. If PR TIMES can keep this up, we'd be very optimistic about its future.

The Key Takeaway

In short, we'd argue PR TIMES has the makings of a multi-bagger since its been able to compound its capital at very profitable rates of return. And since the stock has risen strongly over the last five years, it appears the market might expect this trend to continue. So even though the stock might be more "expensive" than it was before, we think the strong fundamentals warrant this stock for further research.

Like most companies, PR TIMES does come with some risks, and we've found 1 warning sign that you should be aware of.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets 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.