MITSUI-SOKO HOLDINGS (TSE:9302) Is Experiencing Growth In Returns On Capital

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, we've noticed some promising trends at MITSUI-SOKO HOLDINGS (TSE:9302) so let's look a bit deeper.

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. The formula for this calculation on MITSUI-SOKO HOLDINGS is:

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

0.09 = JP¥18b ÷ (JP¥275b - JP¥69b) (Based on the trailing twelve months to June 2024).

So, MITSUI-SOKO HOLDINGS has an ROCE of 9.0%. In absolute terms, that's a low return but it's around the Logistics industry average of 8.3%.

Check out our latest analysis for MITSUI-SOKO HOLDINGS

Above you can see how the current ROCE for MITSUI-SOKO 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 MITSUI-SOKO HOLDINGS .

So How Is MITSUI-SOKO HOLDINGS' ROCE Trending?

MITSUI-SOKO HOLDINGS has not disappointed with their ROCE growth. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 33% over the last five years. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

In Conclusion...

To bring it all together, MITSUI-SOKO HOLDINGS has done well to increase the returns it's generating from its capital employed. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

MITSUI-SOKO HOLDINGS does have some risks though, and we've spotted 1 warning sign for MITSUI-SOKO HOLDINGS that you might be interested in.

While MITSUI-SOKO 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.