Returns At Chuokeizai-Sha Holdings (TSE:9476) Are On The Way Up

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing 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. So when we looked at Chuokeizai-Sha Holdings (TSE:9476) and its trend of ROCE, we really liked what we saw.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

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. The formula for this calculation on Chuokeizai-Sha Holdings is:

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

0.045 = JP¥234m ÷ (JP¥6.1b - JP¥856m) (Based on the trailing twelve months to September 2025).

Thus, Chuokeizai-Sha Holdings has an ROCE of 4.5%. In absolute terms, that's a low return and it also under-performs the Media industry average of 12%.

Check out our latest analysis for Chuokeizai-Sha Holdings

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Chuokeizai-Sha Holdings.

What Does the ROCE Trend For Chuokeizai-Sha Holdings Tell Us?

Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. The data shows that returns on capital have increased substantially over the last five years to 4.5%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 22%. So we're very much inspired by what we're seeing at Chuokeizai-Sha Holdings thanks to its ability to profitably reinvest capital.

Our Take On Chuokeizai-Sha Holdings' ROCE

In summary, it's great to see that Chuokeizai-Sha Holdings can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 59% return over the last five years. In light of that, we think it's worth looking further into this stock because if Chuokeizai-Sha Holdings can keep these trends up, it could have a bright future ahead.

Chuokeizai-Sha Holdings does have some risks though, and we've spotted 3 warning signs for Chuokeizai-Sha Holdings that you might be interested in.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.