Shareholders Would Enjoy A Repeat Of Sanrio Company's (TSE:8136) Recent Growth In Returns

What are the early trends we should look for to identify a stock that could multiply in value over the long term? 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. With that in mind, the ROCE of Sanrio Company (TSE:8136) looks great, so lets see what the trend can tell us.

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 Sanrio Company, this is the formula:

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

0.26 = JP¥32b ÷ (JP¥162b - JP¥38b) (Based on the trailing twelve months to June 2024).

Therefore, Sanrio Company has an ROCE of 26%. In absolute terms that's a great return and it's even better than the Specialty Retail industry average of 11%.

Check out our latest analysis for Sanrio Company

In the above chart we have measured Sanrio Company's 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 Sanrio Company .

So How Is Sanrio Company's ROCE Trending?

We like the trends that we're seeing from Sanrio Company. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 26%. 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 77%. So we're very much inspired by what we're seeing at Sanrio Company thanks to its ability to profitably reinvest capital.

Our Take On Sanrio Company's ROCE

All in all, it's terrific to see that Sanrio Company is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 440% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if Sanrio Company can keep these trends up, it could have a bright future ahead.

While Sanrio Company looks impressive, no company is worth an infinite price. The intrinsic value infographic for 8136 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.