The Returns On Capital At CyberAgent (TSE:4751) Don't Inspire Confidence

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount 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. However, after investigating CyberAgent (TSE:4751), we don't think it's current trends fit the mold of a multi-bagger.

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Understanding Return On Capital Employed (ROCE)

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed 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)

0.12 = JP¥42b ÷ (JP¥520b - JP¥158b) (Based on the trailing twelve months to March 2025).

Therefore, CyberAgent has an ROCE of 12%. On its own, that's a standard return, however it's much better than the 9.3% generated by the Media industry.

View 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'd like to see what analysts are forecasting going forward, you should check out 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 23%, but since then they've fallen to 12%. 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's worth keeping an eye on the company's earnings from here on to see if these investments do end up contributing to the bottom line.

The Bottom Line

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 investors may be recognizing these trends since the stock has only returned a total of 21% to shareholders over the last five years. Therefore, if you're looking for a multi-bagger, we'd propose looking at other options.

CyberAgent could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation for 4751 on our platform quite valuable.

While CyberAgent may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list 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.