Investors Will Want Meiji Shipping Group's (TSE:9115) Growth In ROCE To Persist

If you're looking for a multi-bagger, there's a few things to keep an eye out for. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. With that in mind, we've noticed some promising trends at Meiji Shipping Group (TSE:9115) so let's look a bit deeper.

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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 Meiji Shipping Group:

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

0.044 = JP¥10b ÷ (JP¥280b - JP¥48b) (Based on the trailing twelve months to June 2025).

Thus, Meiji Shipping Group has an ROCE of 4.4%. On its own, that's a low figure but it's around the 4.5% average generated by the Shipping industry.

View our latest analysis for Meiji Shipping Group

Historical performance is a great place to start when researching a stock so above you can see the gauge for Meiji Shipping Group's ROCE against it's prior returns. If you're interested in investigating Meiji Shipping Group's past further, check out this free graph covering Meiji Shipping Group's past earnings, revenue and cash flow.

So How Is Meiji Shipping Group's ROCE Trending?

Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 4.4%. Basically the business is earning more per dollar of capital invested and in addition to that, 57% 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.

In Conclusion...

To sum it up, Meiji Shipping Group has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And a remarkable 118% total return over the last five years tells us that investors are expecting more good things to come in the future. Therefore, we think it would be worth your time to check if these trends are going to continue.

One final note, you should learn about the 2 warning signs we've spotted with Meiji Shipping Group (including 1 which doesn't sit too well with us) .

While Meiji Shipping Group 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.