Citizen Watch (TSE:7762) Might Have The Makings Of A Multi-Bagger

Simply Wall St · 04/15 00:18

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So when we looked at Citizen Watch (TSE:7762) and its trend of ROCE, we really liked what we saw.

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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. To calculate this metric for Citizen Watch, this is the formula:

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

0.061 = JP¥20b ÷ (JP¥431b - JP¥93b) (Based on the trailing twelve months to December 2024).

So, Citizen Watch has an ROCE of 6.1%. Ultimately, that's a low return and it under-performs the Electronic industry average of 9.0%.

See our latest analysis for Citizen Watch

roce
TSE:7762 Return on Capital Employed April 15th 2025

Above you can see how the current ROCE for Citizen Watch compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Citizen Watch for free.

What Does the ROCE Trend For Citizen Watch Tell Us?

Citizen Watch's ROCE growth is quite impressive. The figures show that over the last five years, ROCE has grown 56% 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. It's worth looking deeper into this though because while it's great that the business is more efficient, it might also mean that going forward the areas to invest internally for the organic growth are lacking.

The Bottom Line On Citizen Watch's ROCE

To bring it all together, Citizen Watch has done well to increase the returns it's generating from its capital employed. Since the stock has returned a staggering 171% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if Citizen Watch can keep these trends up, it could have a bright future ahead.

Citizen Watch does come with some risks though, we found 3 warning signs in our investment analysis, and 1 of those is significant...

While Citizen Watch isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.