AZ-COM MARUWA Holdings (TSE:9090) Will Be Hoping To Turn Its Returns On Capital Around

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. However, after briefly looking over the numbers, we don't think AZ-COM MARUWA Holdings (TSE:9090) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

Understanding Return On Capital Employed (ROCE)

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 AZ-COM MARUWA Holdings:

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

0.14 = JP¥14b ÷ (JP¥135b - JP¥34b) (Based on the trailing twelve months to December 2023).

Thus, AZ-COM MARUWA Holdings has an ROCE of 14%. In absolute terms, that's a satisfactory return, but compared to the Logistics industry average of 8.3% it's much better.

See our latest analysis for AZ-COM MARUWA Holdings

In the above chart we have measured AZ-COM MARUWA Holdings' prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for AZ-COM MARUWA Holdings .

What Does the ROCE Trend For AZ-COM MARUWA Holdings Tell Us?

We weren't thrilled with the trend because AZ-COM MARUWA Holdings' ROCE has reduced by 28% over the last five years, while the business employed 243% more capital. However, some of the increase in capital employed could be attributed to the recent capital raising that's been completed prior to their latest reporting period, so keep that in mind when looking at the ROCE decrease. The funds raised likely haven't been put to work yet so it's worth watching what happens in the future with AZ-COM MARUWA Holdings' earnings and if they change as a result from the capital raise.

Our Take On AZ-COM MARUWA Holdings' ROCE

In summary, despite lower returns in the short term, we're encouraged to see that AZ-COM MARUWA Holdings is reinvesting for growth and has higher sales as a result. Furthermore the stock has climbed 42% over the last five years, it would appear that investors are upbeat about the future. So while investors seem to be recognizing these promising trends, we would look further into this stock to make sure the other metrics justify the positive view.

If you want to continue researching AZ-COM MARUWA Holdings, you might be interested to know about the 2 warning signs that our analysis has discovered.

While AZ-COM MARUWA Holdings 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.