We Like These Underlying Return On Capital Trends At Isetan Mitsukoshi Holdings (TSE:3099)

Did you know there are some financial metrics that can provide clues of a potential 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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Speaking of which, we noticed some great changes in Isetan Mitsukoshi Holdings' (TSE:3099) returns on capital, so let's have a look.

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Understanding Return On Capital Employed (ROCE)

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. Analysts use this formula to calculate it for Isetan Mitsukoshi Holdings:

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

0.089 = JP¥73b ÷ (JP¥1.2t - JP¥413b) (Based on the trailing twelve months to December 2024).

Thus, Isetan Mitsukoshi Holdings has an ROCE of 8.9%. In absolute terms, that's a low return but it's around the Multiline Retail industry average of 11%.

View our latest analysis for Isetan Mitsukoshi Holdings

In the above chart we have measured Isetan Mitsukoshi Holdings' prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Isetan Mitsukoshi Holdings .

The Trend Of ROCE

Isetan Mitsukoshi Holdings is showing promise given that its ROCE is trending up and to the right. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 211% over the last five years. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

The Bottom Line On Isetan Mitsukoshi Holdings' ROCE

To sum it up, Isetan Mitsukoshi Holdings is collecting higher returns from the same amount of capital, and that's impressive. And a remarkable 189% 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.

Isetan Mitsukoshi Holdings does have some risks, we noticed 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

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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.