AIInc (TSE:4388) Has More To Do To Multiply In Value Going Forward

What are the early trends we should look for to identify a stock that could multiply in value over the long term? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. However, after investigating AIInc (TSE:4388), we don't think it's current trends fit the mold of a multi-bagger.

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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. To calculate this metric for AIInc, this is the formula:

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

0.042 = JP¥109m ÷ (JP¥3.0b - JP¥356m) (Based on the trailing twelve months to March 2025).

So, AIInc has an ROCE of 4.2%. Ultimately, that's a low return and it under-performs the Software industry average of 16%.

Check out our latest analysis for AIInc

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you're interested in investigating AIInc's past further, check out this free graph covering AIInc's past earnings, revenue and cash flow.

What Does the ROCE Trend For AIInc Tell Us?

Over the past , AIInc's ROCE and capital employed have both remained mostly flat. It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. With that in mind, unless investment picks up again in the future, we wouldn't expect AIInc to be a multi-bagger going forward.

Our Take On AIInc's ROCE

In a nutshell, AIInc has been trudging along with the same returns from the same amount of capital over the last . Moreover, since the stock has crumbled 76% over the last five years, it appears investors are expecting the worst. On the whole, we aren't too inspired by the underlying trends and we think there may be better chances of finding a multi-bagger elsewhere.

If you want to know some of the risks facing AIInc we've found 4 warning signs (1 doesn't sit too well with us!) that you should be aware of before investing here.

While AIInc isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.