Property Data Bank (TSE:4389) Hasn't Managed To Accelerate Its Returns

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. 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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So when we looked at Property Data Bank (TSE:4389), they do have a high ROCE, but we weren't exactly elated from how returns are trending.

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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. The formula for this calculation on Property Data Bank is:

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

0.24 = JP¥937m ÷ (JP¥4.8b - JP¥856m) (Based on the trailing twelve months to March 2025).

So, Property Data Bank has an ROCE of 24%. 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 Property Data Bank

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

What Can We Tell From Property Data Bank's ROCE Trend?

Things have been pretty stable at Property Data Bank, with its capital employed and returns on that capital staying somewhat the same for the last two years. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. So it may not be a multi-bagger in the making, but given the decent 24% return on capital, it'd be difficult to find fault with the business's current operations.

The Bottom Line

Although is allocating it's capital efficiently to generate impressive returns, it isn't compounding its base of capital, which is what we'd see from a multi-bagger. Although the market must be expecting these trends to improve because the stock has gained 63% over the last five years. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.

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

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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.