MaruwaLtd (TSE:5344) Has More To Do To Multiply In Value Going Forward

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So, when we ran our eye over MaruwaLtd's (TSE:5344) trend of ROCE, we liked what we saw.

What Is Return On Capital Employed (ROCE)?

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. The formula for this calculation on MaruwaLtd is:

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

0.18 = JP¥18b ÷ (JP¥116b - JP¥11b) (Based on the trailing twelve months to December 2023).

Thus, MaruwaLtd has an ROCE of 18%. In absolute terms, that's a satisfactory return, but compared to the Electronic industry average of 9.7% it's much better.

Check out our latest analysis for MaruwaLtd

Above you can see how the current ROCE for MaruwaLtd compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for MaruwaLtd .

So How Is MaruwaLtd's ROCE Trending?

The trend of ROCE doesn't stand out much, but returns on a whole are decent. The company has employed 95% more capital in the last five years, and the returns on that capital have remained stable at 18%. 18% is a pretty standard return, and it provides some comfort knowing that MaruwaLtd has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

What We Can Learn From MaruwaLtd's ROCE

The main thing to remember is that MaruwaLtd has proven its ability to continually reinvest at respectable rates of return. And long term investors would be thrilled with the 505% return they've received over the last five years. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

MaruwaLtd could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation for 5344 on our platform quite valuable.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and 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.