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Meiko Electronics (TSE:6787) Is Doing The Right Things To Multiply Its Share Price

Simply Wall St · 12/30/2025 21:22

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So when we looked at Meiko Electronics (TSE:6787) and its trend of ROCE, we really liked what we saw.

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

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Meiko Electronics:

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

0.11 = JP¥21b ÷ (JP¥303b - JP¥119b) (Based on the trailing twelve months to September 2025).

Therefore, Meiko Electronics has an ROCE of 11%. In absolute terms, that's a satisfactory return, but compared to the Electronic industry average of 9.2% it's much better.

See our latest analysis for Meiko Electronics

roce
TSE:6787 Return on Capital Employed December 30th 2025

In the above chart we have measured Meiko Electronics' prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Meiko Electronics .

What Can We Tell From Meiko Electronics' ROCE Trend?

Investors would be pleased with what's happening at Meiko Electronics. Over the last five years, returns on capital employed have risen substantially to 11%. Basically the business is earning more per dollar of capital invested and in addition to that, 134% more capital is being employed now too. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

What We Can Learn From Meiko Electronics' ROCE

In summary, it's great to see that Meiko Electronics can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And a remarkable 517% total return over the last five years tells us that investors are expecting more good things to come in the future. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

On a final note, we found 2 warning signs for Meiko Electronics (1 doesn't sit too well with us) you should be aware of.

While Meiko Electronics 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.