We Like FFRI Security's (TSE:3692) Returns And Here's How They're Trending

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So when we looked at the ROCE trend of FFRI Security (TSE:3692) 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 FFRI Security, this is the formula:

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

0.29 = JP¥817m ÷ (JP¥4.3b - JP¥1.5b) (Based on the trailing twelve months to March 2025).

Therefore, FFRI Security has an ROCE of 29%. In absolute terms that's a great return and it's even better than the Software industry average of 17%.

See our latest analysis for FFRI Security

Historical performance is a great place to start when researching a stock so above you can see the gauge for FFRI Security's ROCE against it's prior returns. If you're interested in investigating FFRI Security's past further, check out this free graph covering FFRI Security's past earnings, revenue and cash flow.

So How Is FFRI Security's ROCE Trending?

The trends we've noticed at FFRI Security are quite reassuring. The data shows that returns on capital have increased substantially over the last five years to 29%. Basically the business is earning more per dollar of capital invested and in addition to that, 54% more capital is being employed now too. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

What We Can Learn From FFRI Security's ROCE

All in all, it's terrific to see that FFRI Security is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 183% 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 FFRI Security can keep these trends up, it could have a bright future ahead.

On a separate note, we've found 2 warning signs for FFRI Security you'll probably want to know about.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets 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.