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Investors Will Want Mercari's (TSE:4385) Growth In ROCE To Persist

Simply Wall St · 1d ago

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. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at Mercari (TSE:4385) and its trend of ROCE, we really liked what we saw.

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What Is Return On Capital Employed (ROCE)?

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. To calculate this metric for Mercari, this is the formula:

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

0.16 = JP¥32b ÷ (JP¥557b - JP¥350b) (Based on the trailing twelve months to September 2025).

So, Mercari has an ROCE of 16%. In absolute terms, that's a satisfactory return, but compared to the Multiline Retail industry average of 9.1% it's much better.

Check out our latest analysis for Mercari

roce
TSE:4385 Return on Capital Employed December 23rd 2025

In the above chart we have measured Mercari'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 Mercari .

The Trend Of ROCE

We're delighted to see that Mercari is reaping rewards from its investments and is now generating some pre-tax profits. About five years ago the company was generating losses but things have turned around because it's now earning 16% on its capital. In addition to that, Mercari is employing 133% more capital than previously which is expected of a company that's trying to break into profitability. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.

Another thing to note, Mercari has a high ratio of current liabilities to total assets of 63%. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. Ideally we'd like to see this reduce as that would mean fewer obligations bearing risks.

The Bottom Line On Mercari's ROCE

In summary, it's great to see that Mercari has managed to break into profitability and is continuing to reinvest in its business. And since the stock has fallen 32% over the last five years, there might be an opportunity here. With that in mind, we believe the promising trends warrant this stock for further investigation.

If you'd like to know more about Mercari, we've spotted 2 warning signs, and 1 of them is a bit unpleasant.

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