Shareholders Would Enjoy A Repeat Of Japan Elevator Service HoldingsLtd's (TSE:6544) Recent Growth In Returns
If you're looking for a multi-bagger, there's a few things to keep an eye out for. 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. And in light of that, the trends we're seeing at Japan Elevator Service HoldingsLtd's (TSE:6544) look very promising so lets take a look.
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. Analysts use this formula to calculate it for Japan Elevator Service HoldingsLtd:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.42 = JP¥9.8b ÷ (JP¥36b - JP¥13b) (Based on the trailing twelve months to September 2025).
Thus, Japan Elevator Service HoldingsLtd has an ROCE of 42%. That's a fantastic return and not only that, it outpaces the average of 8.9% earned by companies in a similar industry.
Check out our latest analysis for Japan Elevator Service HoldingsLtd
Above you can see how the current ROCE for Japan Elevator Service HoldingsLtd 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 Japan Elevator Service HoldingsLtd .
What Does the ROCE Trend For Japan Elevator Service HoldingsLtd Tell Us?
The trends we've noticed at Japan Elevator Service HoldingsLtd are quite reassuring. The data shows that returns on capital have increased substantially over the last five years to 42%. 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 113%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.
The Key Takeaway
All in all, it's terrific to see that Japan Elevator Service HoldingsLtd is reaping the rewards from prior investments and is growing its capital base. And with a respectable 53% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. Therefore, we think it would be worth your time to check if these trends are going to continue.
While Japan Elevator Service HoldingsLtd looks impressive, no company is worth an infinite price. The intrinsic value infographic for 6544 helps visualize whether it is currently trading for a fair price.
Japan Elevator Service HoldingsLtd is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.
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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.