Returns On Capital Are Showing Encouraging Signs At Alps Alpine (TSE:6770)

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Speaking of which, we noticed some great changes in Alps Alpine's (TSE:6770) returns on capital, so let's have a look.

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Understanding Return On Capital Employed (ROCE)

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. The formula for this calculation on Alps Alpine is:

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

0.071 = JP¥35b ÷ (JP¥705b - JP¥206b) (Based on the trailing twelve months to June 2025).

Therefore, Alps Alpine has an ROCE of 7.1%. In absolute terms, that's a low return and it also under-performs the Electronic industry average of 9.1%.

Check out our latest analysis for Alps Alpine

Above you can see how the current ROCE for Alps Alpine 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 Alps Alpine .

The Trend Of ROCE

Alps Alpine's ROCE growth is quite impressive. The figures show that over the last five years, ROCE has grown 114% whilst employing roughly the same amount of capital. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

Our Take On Alps Alpine's ROCE

To bring it all together, Alps Alpine has done well to increase the returns it's generating from its capital employed. Investors may not be impressed by the favorable underlying trends yet because over the last five years the stock has only returned 15% to shareholders. So exploring more about this stock could uncover a good opportunity, if the valuation and other metrics stack up.

One more thing: We've identified 3 warning signs with Alps Alpine (at least 1 which is a bit unpleasant) , and understanding them would certainly be useful.

While Alps Alpine isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.