Yamato Holdings (TSE:9064) Will Be Looking To Turn Around Its Returns

When researching a stock for investment, what can tell us that the company is in decline? A business that's potentially in decline often shows two trends, a return on capital employed (ROCE) that's declining, and a base of capital employed that's also declining. This indicates the company is producing less profit from its investments and its total assets are decreasing. So after glancing at the trends within Yamato Holdings (TSE:9064), we weren't too hopeful.

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

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 Yamato Holdings:

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

0.016 = JP¥13b ÷ (JP¥1.1t - JP¥314b) (Based on the trailing twelve months to September 2024).

So, Yamato Holdings has an ROCE of 1.6%. Ultimately, that's a low return and it under-performs the Logistics industry average of 8.5%.

View our latest analysis for Yamato Holdings

Above you can see how the current ROCE for Yamato Holdings compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Yamato Holdings .

So How Is Yamato Holdings' ROCE Trending?

In terms of Yamato Holdings' historical ROCE movements, the trend doesn't inspire confidence. Unfortunately the returns on capital have diminished from the 5.9% that they were earning five years ago. Meanwhile, capital employed in the business has stayed roughly the flat over the period. Since returns are falling and the business has the same amount of assets employed, this can suggest it's a mature business that hasn't had much growth in the last five years. So because these trends aren't typically conducive to creating a multi-bagger, we wouldn't hold our breath on Yamato Holdings becoming one if things continue as they have.

Our Take On Yamato Holdings' ROCE

In summary, it's unfortunate that Yamato Holdings is generating lower returns from the same amount of capital. Investors must expect better things on the horizon though because the stock has risen 7.2% in the last five years. Either way, we aren't huge fans of the current trends and so with that we think you might find better investments elsewhere.

One more thing, we've spotted 3 warning signs facing Yamato Holdings that you might find interesting.

While Yamato Holdings 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.