Many Would Be Envious Of Japan PropTechLtd's (TSE:4054) Excellent Returns On Capital

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. That's why when we briefly looked at Japan PropTechLtd's (TSE:4054) ROCE trend, we were very happy with what we saw.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

What Is 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. The formula for this calculation on Japan PropTechLtd is:

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

0.26 = JP¥1.0b ÷ (JP¥5.5b - JP¥1.5b) (Based on the trailing twelve months to March 2025).

So, Japan PropTechLtd has an ROCE of 26%. That's a fantastic return and not only that, it outpaces the average of 17% earned by companies in a similar industry.

See our latest analysis for Japan PropTechLtd

Above you can see how the current ROCE for Japan PropTechLtd 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 Japan PropTechLtd .

What Does the ROCE Trend For Japan PropTechLtd Tell Us?

It's hard not to be impressed by Japan PropTechLtd's returns on capital. Over the past four years, ROCE has remained relatively flat at around 26% and the business has deployed 56% more capital into its operations. Returns like this are the envy of most businesses and given it has repeatedly reinvested at these rates, that's even better. If these trends can continue, it wouldn't surprise us if the company became a multi-bagger.

What We Can Learn From Japan PropTechLtd's ROCE

In summary, we're delighted to see that Japan PropTechLtd has been compounding returns by reinvesting at consistently high rates of return, as these are common traits of a multi-bagger. Yet over the last five years the stock has declined 22%, so the decline might provide an opening. For that reason, savvy investors might want to look further into this company in case it's a prime investment.

If you'd like to know about the risks facing Japan PropTechLtd, we've discovered 2 warning signs that you should be aware of.

Japan PropTechLtd is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.