These Return Metrics Don't Make Oki Electric Industry (TSE:6703) Look Too Strong

When we're researching a company, it's sometimes hard to find the warning signs, but there are some financial metrics that can help spot trouble early. When we see a declining return on capital employed (ROCE) in conjunction with a declining base of capital employed, that's often how a mature business shows signs of aging. This combination can tell you that not only is the company investing less, it's earning less on what it does invest. In light of that, from a first glance at Oki Electric Industry (TSE:6703), we've spotted some signs that it could be struggling, so let's investigate.

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Understanding 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. The formula for this calculation on Oki Electric Industry is:

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

0.056 = JP¥13b ÷ (JP¥394b - JP¥156b) (Based on the trailing twelve months to June 2025).

Therefore, Oki Electric Industry has an ROCE of 5.6%. Ultimately, that's a low return and it under-performs the Electronic industry average of 9.0%.

See our latest analysis for Oki Electric Industry

Above you can see how the current ROCE for Oki Electric Industry 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 Oki Electric Industry .

The Trend Of ROCE

We are a bit worried about the trend of returns on capital at Oki Electric Industry. About five years ago, returns on capital were 7.3%, however they're now substantially lower than that as we saw above. On top of that, it's worth noting that the amount of capital employed within the business has remained relatively steady. Since returns are falling and the business has the same amount of assets employed, this can suggest it's a mature business that hasn't had much growth in the last five years. If these trends continue, we wouldn't expect Oki Electric Industry to turn into a multi-bagger.

In Conclusion...

In summary, it's unfortunate that Oki Electric Industry is generating lower returns from the same amount of capital. However the stock has delivered a 57% return to shareholders over the last five years, so investors might be expecting the trends to turn around. Regardless, we don't feel too comfortable with the fundamentals so we'd be steering clear of this stock for now.

Like most companies, Oki Electric Industry does come with some risks, and we've found 3 warning signs that you should be aware of.

While Oki Electric Industry may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.