Hirose ElectricLtd (TSE:6806) Might Have The Makings Of A Multi-Bagger

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 on that note, Hirose ElectricLtd (TSE:6806) looks quite promising in regards to its trends of return on capital.

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What Is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Hirose ElectricLtd:

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

0.11 = JP¥42b ÷ (JP¥420b - JP¥28b) (Based on the trailing twelve months to June 2025).

Therefore, Hirose ElectricLtd has an ROCE of 11%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Electronic industry average of 9.1%.

View our latest analysis for Hirose ElectricLtd

In the above chart we have measured Hirose ElectricLtd's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Hirose ElectricLtd .

What Can We Tell From Hirose ElectricLtd's ROCE Trend?

Hirose ElectricLtd is displaying some positive trends. Over the last five years, returns on capital employed have risen substantially to 11%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 23%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

In Conclusion...

To sum it up, Hirose ElectricLtd 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 solid 81% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. In light of that, we think it's worth looking further into this stock because if Hirose ElectricLtd can keep these trends up, it could have a bright future ahead.

One more thing, we've spotted 1 warning sign facing Hirose ElectricLtd that you might find interesting.

While Hirose ElectricLtd 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.