Synchro Food (TSE:3963) Is Achieving High Returns On Its Capital

What trends should we look for it we want to identify stocks that can 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Speaking of which, we noticed some great changes in Synchro Food's (TSE:3963) returns on capital, so let's have a look.

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Understanding 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 Synchro Food is:

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

0.21 = JP¥981m ÷ (JP¥5.3b - JP¥669m) (Based on the trailing twelve months to June 2025).

So, Synchro Food has an ROCE of 21%. On its own, that's a very good return and it's on par with the returns earned by companies in a similar industry.

See our latest analysis for Synchro Food

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

So How Is Synchro Food's ROCE Trending?

We like the trends that we're seeing from Synchro Food. The data shows that returns on capital have increased substantially over the last five years to 21%. The amount of capital employed has increased too, by 75%. So we're very much inspired by what we're seeing at Synchro Food thanks to its ability to profitably reinvest capital.

The Bottom Line On Synchro Food's ROCE

In summary, it's great to see that Synchro Food can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. Since the stock has returned a staggering 128% to shareholders over the last five years, it looks like investors are recognizing these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

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

Synchro Food is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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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.