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GENDA (TSE:9166) Could Be Struggling To Allocate Capital

Simply Wall St · 6d 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. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount 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 GENDA (TSE:9166) 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?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on GENDA is:

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

0.062 = JP¥7.5b ÷ (JP¥197b - JP¥76b) (Based on the trailing twelve months to October 2025).

Therefore, GENDA has an ROCE of 6.2%. Ultimately, that's a low return and it under-performs the Hospitality industry average of 10%.

See our latest analysis for GENDA

roce
TSE:9166 Return on Capital Employed January 6th 2026

Above you can see how the current ROCE for GENDA compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for GENDA .

What The Trend Of ROCE Can Tell Us

Unfortunately, the trend isn't great with ROCE falling from 19% three years ago, while capital employed has grown 441%. That being said, GENDA raised some capital prior to their latest results being released, so that could partly explain the increase in capital employed. The funds raised likely haven't been put to work yet so it's worth watching what happens in the future with GENDA's earnings and if they change as a result from the capital raise.

While on the subject, we noticed that the ratio of current liabilities to total assets has risen to 39%, which has impacted the ROCE. Without this increase, it's likely that ROCE would be even lower than 6.2%. While the ratio isn't currently too high, it's worth keeping an eye on this because if it gets particularly high, the business could then face some new elements of risk.

The Key Takeaway

Even though returns on capital have fallen in the short term, we find it promising that revenue and capital employed have both increased for GENDA. These growth trends haven't led to growth returns though, since the stock has fallen 46% over the last year. As a result, we'd recommend researching this stock further to uncover what other fundamentals of the business can show us.

If you'd like to know more about GENDA, we've spotted 4 warning signs, and 2 of them can't be ignored.

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