Slowing Rates Of Return At Property Data Bank (TSE:4389) Leave Little Room For Excitement

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? 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. In light of that, when we looked at Property Data Bank (TSE:4389) and its ROCE trend, we weren't exactly thrilled.

Understanding Return On Capital Employed (ROCE)

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for Property Data Bank, this is the formula:

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

0.19 = JP¥644m ÷ (JP¥3.7b - JP¥403m) (Based on the trailing twelve months to December 2023).

Therefore, Property Data Bank has an ROCE of 19%. In absolute terms, that's a satisfactory return, but compared to the Software industry average of 15% it's much better.

Check out our latest analysis for Property Data Bank

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 want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Property Data Bank.

The Trend Of ROCE

There hasn't been much to report for Property Data Bank's returns and its level of capital employed because both metrics have been steady for the past . Businesses with these traits tend to be mature and steady operations because they're past the growth phase. So unless we see a substantial change at Property Data Bank in terms of ROCE and additional investments being made, we wouldn't hold our breath on it being a multi-bagger.

Our Take On Property Data Bank's ROCE

In a nutshell, Property Data Bank has been trudging along with the same returns from the same amount of capital over the last . Unsurprisingly, the stock has only gained 24% over the last five years, which potentially indicates that investors are accounting for this going forward. So if you're looking for a multi-bagger, the underlying trends indicate you may have better chances elsewhere.

Property Data Bank does have some risks though, and we've spotted 4 warning signs for Property Data Bank that you might be interested in.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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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.