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The Trend Of High Returns At Konami Group (TSE:9766) Has Us Very Interested
To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So when we looked at the ROCE trend of Konami Group (TSE:9766) we really liked what we saw.
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. To calculate this metric for Konami Group, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.21 = JP¥112b ÷ (JP¥650b - JP¥106b) (Based on the trailing twelve months to December 2024).
So, Konami Group has an ROCE of 21%. That's a fantastic return and not only that, it outpaces the average of 9.7% earned by companies in a similar industry.
Check out our latest analysis for Konami Group
Above you can see how the current ROCE for Konami Group compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Konami Group .
What Can We Tell From Konami Group's ROCE Trend?
We like the trends that we're seeing from Konami Group. Over the last five years, returns on capital employed have risen substantially to 21%. 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 66%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.
The Key Takeaway
To sum it up, Konami Group has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And a remarkable 519% total return over the last five years tells us that investors are expecting more good things to come in the future. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.
On a final note, we've found 1 warning sign for Konami Group that we think you should be aware of.
Konami Group 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.
About TSE:9766
Konami Group
Primarily engages in the digital entertainment, amusement, gaming and systems, and sports businesses.
Solid track record with excellent balance sheet.
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