Fukui Computer HoldingsInc (TSE:9790) Will Be Hoping To Turn Its Returns On Capital Around

Simply Wall St · 04/15 05:55

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. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So when we looked at Fukui Computer HoldingsInc (TSE:9790), they do have a high ROCE, but we weren't exactly elated from how returns are trending.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

Return On Capital Employed (ROCE): What Is It?

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 Fukui Computer HoldingsInc:

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

0.24 = JP¥6.5b ÷ (JP¥32b - JP¥5.2b) (Based on the trailing twelve months to December 2024).

Thus, Fukui Computer HoldingsInc has an ROCE of 24%. In absolute terms that's a great return and it's even better than the Software industry average of 16%.

Check out our latest analysis for Fukui Computer HoldingsInc

roce
TSE:9790 Return on Capital Employed April 15th 2025

In the above chart we have measured Fukui Computer HoldingsInc'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 Fukui Computer HoldingsInc .

The Trend Of ROCE

In terms of Fukui Computer HoldingsInc's historical ROCE movements, the trend isn't fantastic. Historically returns on capital were even higher at 37%, but they have dropped over the last five years. However it looks like Fukui Computer HoldingsInc might be reinvesting for long term growth because while capital employed has increased, the company's sales haven't changed much in the last 12 months. It may take some time before the company starts to see any change in earnings from these investments.

The Key Takeaway

Bringing it all together, while we're somewhat encouraged by Fukui Computer HoldingsInc's reinvestment in its own business, we're aware that returns are shrinking. Since the stock has gained an impressive 41% over the last five years, investors must think there's better things to come. But if the trajectory of these underlying trends continue, we think the likelihood of it being a multi-bagger from here isn't high.

While Fukui Computer HoldingsInc doesn't shine too bright in this respect, it's still worth seeing if the company is trading at attractive prices. You can find that out with our FREE intrinsic value estimation for 9790 on our platform.

Fukui Computer HoldingsInc is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.