Returns Are Gaining Momentum At Appier Group (TSE:4180)

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing 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. So on that note, Appier Group (TSE:4180) looks quite promising in regards to its trends of return on capital.

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Understanding 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 Appier Group:

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

0.053 = JP¥2.2b ÷ (JP¥54b - JP¥13b) (Based on the trailing twelve months to June 2025).

So, Appier Group has an ROCE of 5.3%. In absolute terms, that's a low return and it also under-performs the Software industry average of 18%.

See our latest analysis for Appier Group

In the above chart we have measured Appier Group'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 Appier Group .

The Trend Of ROCE

The fact that Appier Group is now generating some pre-tax profits from its prior investments is very encouraging. About five years ago the company was generating losses but things have turned around because it's now earning 5.3% on its capital. And unsurprisingly, like most companies trying to break into the black, Appier Group is utilizing 4,606% more capital than it was five years ago. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.

In another part of our analysis, we noticed that the company's ratio of current liabilities to total assets decreased to 24%, which broadly means the business is relying less on its suppliers or short-term creditors to fund its operations. This tells us that Appier Group has grown its returns without a reliance on increasing their current liabilities, which we're very happy with.

What We Can Learn From Appier Group's ROCE

In summary, it's great to see that Appier Group has managed to break into profitability and is continuing to reinvest in its business. Astute investors may have an opportunity here because the stock has declined 38% in the last three years. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

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

While Appier Group 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.