U-NEXT HOLDINGSLtd (TSE:9418) Is Experiencing Growth In Returns On Capital

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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Speaking of which, we noticed some great changes in U-NEXT HOLDINGSLtd's (TSE:9418) returns on capital, so let's have a look.

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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. Analysts use this formula to calculate it for U-NEXT HOLDINGSLtd:

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

0.17 = JP¥30b ÷ (JP¥242b - JP¥69b) (Based on the trailing twelve months to February 2025).

So, U-NEXT HOLDINGSLtd has an ROCE of 17%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Telecom industry average of 20%.

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.

What Can We Tell From U-NEXT HOLDINGSLtd's ROCE Trend?

Investors would be pleased with what's happening at U-NEXT HOLDINGSLtd. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 17%. Basically the business is earning more per dollar of capital invested and in addition to that, 78% 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.

Our Take On U-NEXT HOLDINGSLtd's ROCE

In summary, it's great to see that U-NEXT HOLDINGSLtd can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. Since the stock has returned a staggering 414% to shareholders over the last five years, it looks like investors are recognizing these changes. 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.

On the other side of ROCE, we have to consider valuation. That's why we have a FREE intrinsic value estimation for 9418 on our platform that is definitely worth checking out.

While U-NEXT HOLDINGSLtd 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.