Iino Kaiun Kaisha's (TSE:9119) Returns On Capital Are Heading Higher

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base 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. Speaking of which, we noticed some great changes in Iino Kaiun Kaisha's (TSE:9119) returns on capital, so let's have a look.

What Is Return On Capital Employed (ROCE)?

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 Iino Kaiun Kaisha:

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

0.08 = JP¥19b ÷ (JP¥293b - JP¥56b) (Based on the trailing twelve months to March 2024).

Therefore, Iino Kaiun Kaisha has an ROCE of 8.0%. On its own that's a low return, but compared to the average of 4.5% generated by the Shipping industry, it's much better.

View our latest analysis for Iino Kaiun Kaisha

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you're interested in investigating Iino Kaiun Kaisha's past further, check out this free graph covering Iino Kaiun Kaisha's past earnings, revenue and cash flow.

What Does the ROCE Trend For Iino Kaiun Kaisha Tell Us?

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 8.0%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 39%. So we're very much inspired by what we're seeing at Iino Kaiun Kaisha thanks to its ability to profitably reinvest capital.

Our Take On Iino Kaiun Kaisha's ROCE

In summary, it's great to see that Iino Kaiun Kaisha 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. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. Therefore, we think it would be worth your time to check if these trends are going to continue.

On a separate note, we've found 1 warning sign for Iino Kaiun Kaisha you'll probably want to know about.

While Iino Kaiun Kaisha 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.