Canon Marketing Japan (TSE:8060) Is Looking To Continue Growing Its Returns On Capital

What are the early trends we should look for to identify a stock that could multiply in value over the long term? 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 on that note, Canon Marketing Japan (TSE:8060) looks quite promising in regards to its trends of return on capital.

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. Analysts use this formula to calculate it for Canon Marketing Japan:

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

0.12 = JP¥52b ÷ (JP¥557b - JP¥111b) (Based on the trailing twelve months to December 2023).

So, Canon Marketing Japan has an ROCE of 12%. In absolute terms, that's a satisfactory return, but compared to the Electronic industry average of 9.7% it's much better.

See our latest analysis for Canon Marketing Japan

Above you can see how the current ROCE for Canon Marketing Japan compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Canon Marketing Japan for free.

So How Is Canon Marketing Japan's ROCE Trending?

Investors would be pleased with what's happening at Canon Marketing Japan. The data shows that returns on capital have increased substantially over the last five years to 12%. 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 21%. So we're very much inspired by what we're seeing at Canon Marketing Japan thanks to its ability to profitably reinvest capital.

The Key Takeaway

All in all, it's terrific to see that Canon Marketing Japan is reaping the rewards from prior investments and is growing its capital base. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

One more thing, we've spotted 1 warning sign facing Canon Marketing Japan that you might find interesting.

While Canon Marketing Japan 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.