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TDSE (TSE:7046) Has More To Do To Multiply In Value Going Forward

Simply Wall St · 3d ago

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? 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 TDSE (TSE:7046) 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?

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. The formula for this calculation on TDSE is:

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

0.071 = JP¥160m ÷ (JP¥2.7b - JP¥434m) (Based on the trailing twelve months to September 2025).

Therefore, TDSE has an ROCE of 7.1%. Ultimately, that's a low return and it under-performs the IT industry average of 16%.

View our latest analysis for TDSE

roce
TSE:7046 Return on Capital Employed January 7th 2026

Above you can see how the current ROCE for TDSE 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 TDSE .

How Are Returns Trending?

There are better returns on capital out there than what we're seeing at TDSE. Over the past five years, ROCE has remained relatively flat at around 7.1% and the business has deployed 44% more capital into its operations. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

Our Take On TDSE's ROCE

In summary, TDSE has simply been reinvesting capital and generating the same low rate of return as before. Since the stock has declined 15% over the last five years, investors may not be too optimistic on this trend improving either. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere.

TDSE does have some risks, we noticed 3 warning signs (and 1 which shouldn't be ignored) we think you should know about.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.