Returns Are Gaining Momentum At Yamazaki Baking (TSE:2212)
If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. 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, Yamazaki Baking (TSE:2212) looks quite promising in regards to its trends of return on capital.
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 Yamazaki Baking is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.093 = JP¥58b ÷ (JP¥875b - JP¥252b) (Based on the trailing twelve months to September 2025).
So, Yamazaki Baking has an ROCE of 9.3%. In absolute terms, that's a low return, but it's much better than the Food industry average of 7.3%.
See our latest analysis for Yamazaki Baking
In the above chart we have measured Yamazaki Baking's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Yamazaki Baking for free.
The Trend Of ROCE
While in absolute terms it isn't a high ROCE, it's promising to see that it has been moving in the right direction. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 9.3%. The amount of capital employed has increased too, by 26%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.
The Bottom Line On Yamazaki Baking's ROCE
To sum it up, Yamazaki Baking has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Since the stock has returned a solid 93% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.
While Yamazaki Baking looks impressive, no company is worth an infinite price. The intrinsic value infographic for 2212 helps visualize whether it is currently trading for a fair price.
While Yamazaki Baking 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.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.