We Think santec Holdings (TSE:6777) Might Have The DNA Of A Multi-Bagger

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. And in light of that, the trends we're seeing at santec Holdings' (TSE:6777) look very promising so lets take a look.

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What Is 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. To calculate this metric for santec Holdings, this is the formula:

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

0.31 = JP¥7.5b ÷ (JP¥29b - JP¥5.0b) (Based on the trailing twelve months to June 2025).

So, santec Holdings has an ROCE of 31%. That's a fantastic return and not only that, it outpaces the average of 9.0% earned by companies in a similar industry.

View our latest analysis for santec Holdings

In the above chart we have measured santec Holdings' prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for santec Holdings .

What Does the ROCE Trend For santec Holdings Tell Us?

santec Holdings is displaying some positive trends. The data shows that returns on capital have increased substantially over the last five years to 31%. Basically the business is earning more per dollar of capital invested and in addition to that, 138% more capital is being employed now too. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

What We Can Learn From santec Holdings' ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what santec Holdings has. And a remarkable 420% total return over the last five years tells us that investors are expecting more good things to come in the future. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

santec Holdings does have some risks though, and we've spotted 1 warning sign for santec Holdings that you might be interested in.

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.