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We Like These Underlying Return On Capital Trends At AeroEdge (TSE:7409)

Simply Wall St · 10/07 21:16

If you're looking for a multi-bagger, there's a few things to keep an eye out for. 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. So on that note, AeroEdge (TSE:7409) looks quite promising in regards to its trends of return on capital.

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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. The formula for this calculation on AeroEdge is:

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

0.09 = JP¥655m ÷ (JP¥8.2b - JP¥940m) (Based on the trailing twelve months to June 2025).

Therefore, AeroEdge has an ROCE of 9.0%. On its own that's a low return, but compared to the average of 7.4% generated by the Aerospace & Defense industry, it's much better.

View our latest analysis for AeroEdge

roce
TSE:7409 Return on Capital Employed October 7th 2025

Above you can see how the current ROCE for AeroEdge 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 AeroEdge for free.

What Does the ROCE Trend For AeroEdge Tell Us?

The fact that AeroEdge is now generating some pre-tax profits from its prior investments is very encouraging. Shareholders would no doubt be pleased with this because the business was loss-making four years ago but is is now generating 9.0% on its capital. Not only that, but the company is utilizing 54% more capital than before, but that's to be expected from a company trying to break into profitability. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

The Bottom Line On AeroEdge's ROCE

Long story short, we're delighted to see that AeroEdge's reinvestment activities have paid off and the company is now profitable. Since the stock has returned a staggering 202% to shareholders over the last year, it looks like investors are recognizing these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 3 warning signs for AeroEdge (of which 2 are significant!) that you should know about.

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.