WEBULL

Returns On Capital At Alfresa Holdings (TSE:2784) Have Stalled

Simply Wall St · 4d ago

What trends should we look for it we want to identify stocks that can multiply in value over the long term? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing 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. Although, when we looked at Alfresa Holdings (TSE:2784), it didn't seem to tick all of these boxes.

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What Is Return On Capital Employed (ROCE)?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on Alfresa Holdings is:

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

0.071 = JP¥39b ÷ (JP¥1.5t - JP¥949b) (Based on the trailing twelve months to September 2025).

Thus, Alfresa Holdings has an ROCE of 7.1%. In absolute terms, that's a low return but it's around the Healthcare industry average of 8.3%.

See our latest analysis for Alfresa Holdings

roce
TSE:2784 Return on Capital Employed January 6th 2026

Above you can see how the current ROCE for Alfresa Holdings compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Alfresa Holdings .

How Are Returns Trending?

Things have been pretty stable at Alfresa Holdings, with its capital employed and returns on that capital staying somewhat the same for the last five years. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. So unless we see a substantial change at Alfresa Holdings in terms of ROCE and additional investments being made, we wouldn't hold our breath on it being a multi-bagger.

On a side note, Alfresa Holdings' current liabilities are still rather high at 63% 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.

The Bottom Line

In summary, Alfresa Holdings isn't compounding its earnings but is generating stable returns on the same amount of capital employed. Since the stock has gained an impressive 46% over the last five years, investors must think there's better things to come. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.

On a separate note, we've found 1 warning sign for Alfresa Holdings you'll probably want to know about.

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