The Return Trends At U-NEXT HOLDINGSLtd (TSE:9418) Look Promising

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So on that note, U-NEXT HOLDINGSLtd (TSE:9418) looks quite promising in regards to its trends of return on capital.

Return On Capital Employed (ROCE): What Is It?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on U-NEXT HOLDINGSLtd is:

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

0.18 = JP¥29b ÷ (JP¥229b - JP¥72b) (Based on the trailing twelve months to August 2024).

So, U-NEXT HOLDINGSLtd has an ROCE of 18%. That's a relatively normal return on capital, and it's around the 22% generated by the Telecom industry.

See our latest analysis for U-NEXT HOLDINGSLtd

Above you can see how the current ROCE for U-NEXT HOLDINGSLtd 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 U-NEXT HOLDINGSLtd for free.

How Are Returns Trending?

Investors would be pleased with what's happening at U-NEXT HOLDINGSLtd. Over the last five years, returns on capital employed have risen substantially to 18%. 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 65%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

The Key Takeaway

All in all, it's terrific to see that U-NEXT HOLDINGSLtd is reaping the rewards from prior investments and is growing its capital base. And a remarkable 275% 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.

Before jumping to any conclusions though, we need to know what value we're getting for the current share price. That's where you can check out our FREE intrinsic value estimation for 9418 that compares the share price and estimated value.

While U-NEXT HOLDINGSLtd 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.