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eMnet Japan.co.ltd (TSE:7036) Will Want To Turn Around Its Return Trends

Simply Wall St · 1d ago

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look 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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Having said that, from a first glance at eMnet Japan.co.ltd (TSE:7036) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

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

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for eMnet Japan.co.ltd:

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

0.12 = JP¥186m ÷ (JP¥2.8b - JP¥1.2b) (Based on the trailing twelve months to June 2025).

Therefore, eMnet Japan.co.ltd has an ROCE of 12%. That's a pretty standard return and it's in line with the industry average of 12%.

View our latest analysis for eMnet Japan.co.ltd

roce
TSE:7036 Return on Capital Employed December 5th 2025

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how eMnet Japan.co.ltd has performed in the past in other metrics, you can view this free graph of eMnet Japan.co.ltd's past earnings, revenue and cash flow.

The Trend Of ROCE

In terms of eMnet Japan.co.ltd's historical ROCE movements, the trend isn't fantastic. To be more specific, ROCE has fallen from 24% over the last five years. Although, given both revenue and the amount of assets employed in the business have increased, it could suggest the company is investing in growth, and the extra capital has led to a short-term reduction in ROCE. If these investments prove successful, this can bode very well for long term stock performance.

On a related note, eMnet Japan.co.ltd has decreased its current liabilities to 43% of total assets. That could partly explain why the ROCE has dropped. What's more, this can reduce some aspects of risk to the business because now the company's suppliers or short-term creditors are funding less of its operations. Since the business is basically funding more of its operations with it's own money, you could argue this has made the business less efficient at generating ROCE. Either way, they're still at a pretty high level, so we'd like to see them fall further if possible.

In Conclusion...

While returns have fallen for eMnet Japan.co.ltd in recent times, we're encouraged to see that sales are growing and that the business is reinvesting in its operations. These trends are starting to be recognized by investors since the stock has delivered a 15% gain to shareholders who've held over the last five years. Therefore we'd recommend looking further into this stock to confirm if it has the makings of a good investment.

eMnet Japan.co.ltd does have some risks, we noticed 3 warning signs (and 1 which is a bit unpleasant) we think you should know about.

While eMnet Japan.co.ltd 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.