Why We Like The Returns At Bank of InnovationInc (TSE:4393)

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So when we looked at the ROCE trend of Bank of InnovationInc (TSE:4393) we really 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 Bank of InnovationInc, this is the formula:

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

0.31 = JP¥1.6b ÷ (JP¥6.6b - JP¥1.5b) (Based on the trailing twelve months to December 2024).

So, Bank of InnovationInc has an ROCE of 31%. In absolute terms that's a great return and it's even better than the Entertainment industry average of 8.9%.

Check out our latest analysis for Bank of InnovationInc

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

The Trend Of ROCE

Bank of InnovationInc has recently broken into profitability so their prior investments seem to be paying off. Shareholders would no doubt be pleased with this because the business was loss-making four years ago but is is now generating 31% on its capital. And unsurprisingly, like most companies trying to break into the black, Bank of InnovationInc is utilizing 129% more capital than it was four years ago. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.

The Bottom Line

To the delight of most shareholders, Bank of InnovationInc has now broken into profitability. Since the stock has returned a staggering 335% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if Bank of InnovationInc can keep these trends up, it could have a bright future ahead.

One more thing, we've spotted 1 warning sign facing Bank of InnovationInc that you might find interesting.

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.