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Returns On Capital Are Showing Encouraging Signs At Koike Sanso KogyoLtd (TSE:6137)

Simply Wall St · 01/08 21:33

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. 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 on that note, Koike Sanso KogyoLtd (TSE:6137) looks quite promising in regards to its trends of return on capital.

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Understanding Return On Capital Employed (ROCE)

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 Koike Sanso KogyoLtd is:

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

0.079 = JP¥4.1b ÷ (JP¥73b - JP¥20b) (Based on the trailing twelve months to September 2025).

So, Koike Sanso KogyoLtd has an ROCE of 7.9%. Even though it's in line with the industry average of 8.0%, it's still a low return by itself.

View our latest analysis for Koike Sanso KogyoLtd

roce
TSE:6137 Return on Capital Employed January 8th 2026

In the above chart we have measured Koike Sanso KogyoLtd's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Koike Sanso KogyoLtd .

The Trend Of ROCE

Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 7.9%. Basically the business is earning more per dollar of capital invested and in addition to that, 39% more capital is being employed now too. So we're very much inspired by what we're seeing at Koike Sanso KogyoLtd thanks to its ability to profitably reinvest capital.

What We Can Learn From Koike Sanso KogyoLtd's ROCE

In summary, it's great to see that Koike Sanso KogyoLtd 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 316% total return over the last five years tells us that investors are expecting more good things to come in the future. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

Koike Sanso KogyoLtd does have some risks though, and we've spotted 1 warning sign for Koike Sanso KogyoLtd that you might be interested in.

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