Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding 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. So, when we ran our eye over Property Data Bank's (TSE:4389) trend of ROCE, we really liked what we saw.
What Is Return On Capital Employed (ROCE)?
For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for Property Data Bank:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.23 = JP¥909m ÷ (JP¥4.7b - JP¥756m) (Based on the trailing twelve months to June 2025).
Thus, Property Data Bank has an ROCE of 23%. That's a fantastic return and not only that, it outpaces the average of 18% earned by companies in a similar industry.
Check out 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 want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Property Data Bank.
What The Trend Of ROCE Can Tell Us
It's hard not to be impressed by Property Data Bank's returns on capital. The company has employed 23% more capital in the last two years, and the returns on that capital have remained stable at 23%. Now considering ROCE is an attractive 23%, this combination is actually pretty appealing because it means the business can consistently put money to work and generate these high returns. You'll see this when looking at well operated businesses or favorable business models.
In Conclusion...
In short, we'd argue Property Data Bank has the makings of a multi-bagger since its been able to compound its capital at very profitable rates of return. Yet over the last five years the stock has declined 11%, 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.
One more thing, we've spotted 2 warning signs facing Property Data Bank that you might find interesting.
Property Data Bank 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.
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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.