There's Been No Shortage Of Growth Recently For Konoike TransportLtd's (TSE:9025) 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. With that in mind, we've noticed some promising trends at Konoike TransportLtd (TSE:9025) so let's look a bit deeper.

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What Is Return On Capital Employed (ROCE)?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for Konoike TransportLtd:

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

0.095 = JP¥22b ÷ (JP¥290b - JP¥59b) (Based on the trailing twelve months to September 2025).

Thus, Konoike TransportLtd has an ROCE of 9.5%. On its own that's a low return on capital but it's in line with the industry's average returns of 9.0%.

See our latest analysis for Konoike TransportLtd

In the above chart we have measured Konoike TransportLtd's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Konoike TransportLtd for free.

What The Trend Of ROCE Can Tell Us

While in absolute terms it isn't a high ROCE, it's promising to see that it has been moving in the right direction. The data shows that returns on capital have increased substantially over the last five years to 9.5%. The amount of capital employed has increased too, by 22%. So we're very much inspired by what we're seeing at Konoike TransportLtd thanks to its ability to profitably reinvest capital.

What We Can Learn From Konoike TransportLtd's ROCE

All in all, it's terrific to see that Konoike TransportLtd is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 237% to shareholders over the last five years, it looks like investors are recognizing these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

Like most companies, Konoike TransportLtd does come with some risks, and we've found 1 warning sign that you should be aware of.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high 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.