Intimate Merger (TSE:7072) Is Experiencing Growth In Returns On Capital

To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So when we looked at Intimate Merger (TSE:7072) and its trend of ROCE, we really liked what we saw.

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Return On Capital Employed (ROCE): What Is It?

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 Intimate Merger:

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

0.12 = JP¥199m ÷ (JP¥2.1b - JP¥525m) (Based on the trailing twelve months to June 2025).

Therefore, Intimate Merger has an ROCE of 12%. In absolute terms, that's a pretty standard return but compared to the IT industry average it falls behind.

See our latest analysis for Intimate Merger

Historical performance is a great place to start when researching a stock so above you can see the gauge for Intimate Merger'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 Intimate Merger.

So How Is Intimate Merger's ROCE Trending?

Intimate Merger's ROCE growth is quite impressive. The figures show that over the last four years, ROCE has grown 266% whilst employing roughly the same amount of capital. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

The Bottom Line On Intimate Merger's ROCE

To sum it up, Intimate Merger is collecting higher returns from the same amount of capital, and that's impressive. Astute investors may have an opportunity here because the stock has declined 22% in the last five years. With that in mind, we believe the promising trends warrant this stock for further investigation.

If you want to know some of the risks facing Intimate Merger we've found 2 warning signs (1 makes us a bit uncomfortable!) that you should be aware of before investing here.

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.