IbidenLtd (TSE:4062) Has Some Way To Go To Become A Multi-Bagger

There are a few key trends to look for if we want to identify the next multi-bagger. 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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. However, after briefly looking over the numbers, we don't think IbidenLtd (TSE:4062) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

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

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. Analysts use this formula to calculate it for IbidenLtd:

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

0.062 = JP¥48b ÷ (JP¥1.0t - JP¥262b) (Based on the trailing twelve months to September 2025).

Therefore, IbidenLtd has an ROCE of 6.2%. In absolute terms, that's a low return and it also under-performs the Electronic industry average of 9.2%.

Check out our latest analysis for IbidenLtd

In the above chart we have measured IbidenLtd's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for IbidenLtd .

What Does the ROCE Trend For IbidenLtd Tell Us?

In terms of IbidenLtd's historical ROCE trend, it doesn't exactly demand attention. The company has consistently earned 6.2% for the last five years, and the capital employed within the business has risen 95% in that time. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.

The Bottom Line On IbidenLtd's ROCE

In conclusion, IbidenLtd has been investing more capital into the business, but returns on that capital haven't increased. Investors must think there's better things to come because the stock has knocked it out of the park, delivering a 131% gain to shareholders who have held over the last five years. Ultimately, if the underlying trends persist, we wouldn't hold our breath on it being a multi-bagger going forward.

IbidenLtd does have some risks though, and we've spotted 1 warning sign for IbidenLtd 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.