The Trend Of High Returns At PAL GROUP Holdings (TSE:2726) Has Us Very Interested

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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 the ROCE trend of PAL GROUP Holdings (TSE:2726) we really liked what we saw.

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

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. To calculate this metric for PAL GROUP Holdings, this is the formula:

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

0.24 = JP¥24b ÷ (JP¥148b - JP¥51b) (Based on the trailing twelve months to February 2025).

Therefore, PAL GROUP Holdings has an ROCE of 24%. In absolute terms that's a great return and it's even better than the Specialty Retail industry average of 10%.

View our latest analysis for PAL GROUP Holdings

Above you can see how the current ROCE for PAL GROUP Holdings compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for PAL GROUP Holdings .

So How Is PAL GROUP Holdings' ROCE Trending?

We like the trends that we're seeing from PAL GROUP Holdings. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 24%. Basically the business is earning more per dollar of capital invested and in addition to that, 65% 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...

In summary, it's great to see that PAL GROUP 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 a remarkable 606% total return over the last five years tells us that investors are expecting more good things to come in the future. Therefore, we think it would be worth your time to check if these trends are going to continue.

While PAL GROUP Holdings looks impressive, no company is worth an infinite price. The intrinsic value infographic for 2726 helps visualize whether it is currently trading for a fair price.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high returns on equity.

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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.