Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at the ROCE trend of OpenWork (TSE:5139) we really liked what we saw.
Understanding 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 OpenWork, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.21 = JP¥1.4b ÷ (JP¥7.7b - JP¥1.1b) (Based on the trailing twelve months to June 2025).
So, OpenWork has an ROCE of 21%. In absolute terms that's a very respectable return and compared to the Interactive Media and Services industry average of 18% it's pretty much on par.
Check out our latest analysis for OpenWork
Historical performance is a great place to start when researching a stock so above you can see the gauge for OpenWork's ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of OpenWork.
How Are Returns Trending?
The trends we've noticed at OpenWork are quite reassuring. The data shows that returns on capital have increased substantially over the last four years to 21%. Basically the business is earning more per dollar of capital invested and in addition to that, 145% more capital is being employed now too. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.
In Conclusion...
All in all, it's terrific to see that OpenWork is reaping the rewards from prior investments and is growing its capital base. And with a respectable 88% awarded to those who held the stock over the last year, you could argue that these developments are starting to get the attention they deserve. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.
Like most companies, OpenWork does come with some risks, and we've found 1 warning sign that you should be aware of.
OpenWork 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.
Valuation is complex, but we're here to simplify it.
Discover if OpenWork might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.
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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.