The Return Trends At ULVAC (TSE:6728) Look Promising

There are a few key trends to look for if we want to identify the next multi-bagger. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So on that note, ULVAC (TSE:6728) looks quite promising in regards to its trends of return on capital.

What Is Return On Capital Employed (ROCE)?

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. Analysts use this formula to calculate it for ULVAC:

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

0.13 = JP¥35b ÷ (JP¥383b - JP¥110b) (Based on the trailing twelve months to December 2024).

Therefore, ULVAC has an ROCE of 13%. That's a relatively normal return on capital, and it's around the 12% generated by the Semiconductor industry.

Check out our latest analysis for ULVAC

In the above chart we have measured ULVAC's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for ULVAC .

The Trend Of ROCE

Investors would be pleased with what's happening at ULVAC. Over the last five years, returns on capital employed have risen substantially to 13%. 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 30%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

The Bottom Line On ULVAC's ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what ULVAC has. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. In light of that, we think it's worth looking further into this stock because if ULVAC can keep these trends up, it could have a bright future ahead.

On a final note, we've found 1 warning sign for ULVAC that we think you should be aware of.

While ULVAC may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.