Why We Like The Returns At Dexerials (TSE:4980)

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. 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 the ROCE trend of Dexerials (TSE:4980) we really liked what we saw.

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 Dexerials:

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

0.35 = JP¥42b ÷ (JP¥161b - JP¥43b) (Based on the trailing twelve months to September 2024).

Thus, Dexerials has an ROCE of 35%. In absolute terms that's a great return and it's even better than the Electronic industry average of 9.5%.

See our latest analysis for Dexerials

Above you can see how the current ROCE for Dexerials compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Dexerials .

So How Is Dexerials' ROCE Trending?

We like the trends that we're seeing from Dexerials. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 35%. The amount of capital employed has increased too, by 63%. So we're very much inspired by what we're seeing at Dexerials thanks to its ability to profitably reinvest capital.

In Conclusion...

To sum it up, Dexerials has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Since the stock has returned a staggering 642% to shareholders over the last five years, it looks like investors are recognizing these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

Like most companies, Dexerials does come with some risks, and we've found 1 warning sign that you should be aware of.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high 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.