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Returns Are Gaining Momentum At TOA (TSE:1885)

Simply Wall St · 3d 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. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base 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. Speaking of which, we noticed some great changes in TOA's (TSE:1885) returns on capital, so let's have a look.

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

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 TOA is:

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

0.18 = JP¥22b ÷ (JP¥303b - JP¥177b) (Based on the trailing twelve months to September 2025).

Therefore, TOA has an ROCE of 18%. On its own, that's a standard return, however it's much better than the 11% generated by the Construction industry.

Check out our latest analysis for TOA

roce
TSE:1885 Return on Capital Employed January 6th 2026

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

What The Trend Of ROCE Can Tell Us

Investors would be pleased with what's happening at TOA. Over the last five years, returns on capital employed have risen substantially to 18%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 31%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

On a side note, TOA's current liabilities are still rather high at 58% of total assets. 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.

In Conclusion...

To sum it up, TOA has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. In light of that, we think it's worth looking further into this stock because if TOA can keep these trends up, it could have a bright future ahead.

If you want to continue researching TOA, you might be interested to know about the 2 warning signs that our analysis has discovered.

While TOA 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.