Kyushu Electric Power Company (TSE:9508) Is Experiencing Growth In Returns On Capital

What trends should we look for it we want to identify stocks that can multiply in value over the long term? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. 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 Kyushu Electric Power Company (TSE:9508) so let's look a bit deeper.

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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. Analysts use this formula to calculate it for Kyushu Electric Power Company:

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

0.046 = JP¥212b ÷ (JP¥5.7t - JP¥1.1t) (Based on the trailing twelve months to June 2025).

So, Kyushu Electric Power Company has an ROCE of 4.6%. Even though it's in line with the industry average of 5.1%, it's still a low return by itself.

View our latest analysis for Kyushu Electric Power Company

In the above chart we have measured Kyushu Electric Power Company's 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 Kyushu Electric Power Company .

What Does the ROCE Trend For Kyushu Electric Power Company Tell Us?

While the ROCE isn't as high as some other companies out there, it's great to see it's on the up. The figures show that over the last five years, ROCE has grown 134% whilst employing roughly the same amount of capital. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

The Bottom Line

To sum it up, Kyushu Electric Power Company is collecting higher returns from the same amount of capital, and that's impressive. Since the stock has returned a solid 90% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

One final note, you should learn about the 3 warning signs we've spotted with Kyushu Electric Power Company (including 2 which are significant) .

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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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.