U-NEXT HOLDINGSLtd (TSE:9418) Is Doing The Right Things To Multiply Its Share Price

To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So when we looked at U-NEXT HOLDINGSLtd (TSE:9418) and its trend of ROCE, we really liked what we saw.

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 U-NEXT HOLDINGSLtd, this is the formula:

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

0.19 = JP¥30b ÷ (JP¥221b - JP¥66b) (Based on the trailing twelve months to May 2024).

Thus, U-NEXT HOLDINGSLtd has an ROCE of 19%. By itself that's a normal return on capital and it's in line with the industry's average returns of 19%.

View 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 to see what analysts are forecasting going forward, you should check out our free analyst report for U-NEXT HOLDINGSLtd .

What Does the ROCE Trend For U-NEXT HOLDINGSLtd Tell Us?

The trends we've noticed at U-NEXT HOLDINGSLtd are quite reassuring. The data shows that returns on capital have increased substantially over the last five years to 19%. The amount of capital employed has increased too, by 64%. So we're very much inspired by what we're seeing at U-NEXT HOLDINGSLtd thanks to its ability to profitably reinvest capital.

In Conclusion...

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 with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. In light of that, we think it's worth looking further into this stock because if U-NEXT HOLDINGSLtd can keep these trends up, it could have a bright future ahead.

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.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.

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