Here's What's Concerning About CyberAgent's (TSE:4751) Returns On Capital

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. In light of that, when we looked at CyberAgent (TSE:4751) and its ROCE trend, we weren't exactly thrilled.

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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. Analysts use this formula to calculate it for CyberAgent:

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

0.15 = JP¥55b ÷ (JP¥531b - JP¥154b) (Based on the trailing twelve months to June 2025).

Therefore, CyberAgent has an ROCE of 15%. On its own, that's a standard return, however it's much better than the 11% generated by the Media industry.

Check out our latest analysis for CyberAgent

In the above chart we have measured CyberAgent's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for CyberAgent .

What Can We Tell From CyberAgent's ROCE Trend?

When we looked at the ROCE trend at CyberAgent, we didn't gain much confidence. Around five years ago the returns on capital were 22%, but since then they've fallen to 15%. However it looks like CyberAgent might be reinvesting for long term growth because while capital employed has increased, the company's sales haven't changed much in the last 12 months. It may take some time before the company starts to see any change in earnings from these investments.

Our Take On CyberAgent's ROCE

Bringing it all together, while we're somewhat encouraged by CyberAgent's reinvestment in its own business, we're aware that returns are shrinking. And with the stock having returned a mere 5.7% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. So if you're looking for a multi-bagger, the underlying trends indicate you may have better chances elsewhere.

If you're still interested in CyberAgent it's worth checking out our FREE intrinsic value approximation for 4751 to see if it's trading at an attractive price in other respects.

While CyberAgent isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.