Capital Investment Trends At Toei AnimationLtd (TSE:4816) Look Strong

There are a few key trends to look for if we want to identify the next multi-bagger. 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Ergo, when we looked at the ROCE trends at Toei AnimationLtd (TSE:4816), we liked what we saw.

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Return On Capital Employed (ROCE): What Is It?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on Toei AnimationLtd is:

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

0.20 = JP¥29b ÷ (JP¥177b - JP¥30b) (Based on the trailing twelve months to December 2024).

Therefore, Toei AnimationLtd has an ROCE of 20%. That's a fantastic return and not only that, it outpaces the average of 8.9% earned by companies in a similar industry.

See our latest analysis for Toei AnimationLtd

In the above chart we have measured Toei AnimationLtd'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 Toei AnimationLtd .

How Are Returns Trending?

Toei AnimationLtd deserves to be commended in regards to it's returns. Over the past five years, ROCE has remained relatively flat at around 20% and the business has deployed 93% more capital into its operations. Now considering ROCE is an attractive 20%, this combination is actually pretty appealing because it means the business can consistently put money to work and generate these high returns. You'll see this when looking at well operated businesses or favorable business models.

In Conclusion...

Toei AnimationLtd has demonstrated its proficiency by generating high returns on increasing amounts of capital employed, which we're thrilled about. And long term investors would be thrilled with the 219% return they've received over the last five years. So while the positive underlying trends may be accounted for by investors, we still think this stock is worth looking into further.

While Toei AnimationLtd looks impressive, no company is worth an infinite price. The intrinsic value infographic for 4816 helps visualize whether it is currently trading for a fair price.

Toei AnimationLtd 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.