There's Been No Shortage Of Growth Recently For GS Yuasa's (TSE:6674) Returns On Capital
To find a multi-bagger stock, what are the underlying trends we should look for in a business? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Speaking of which, we noticed some great changes in GS Yuasa's (TSE:6674) returns on capital, so let's have a look.
Return On Capital Employed (ROCE): What Is It?
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 GS Yuasa:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.10 = JP¥53b ÷ (JP¥684b - JP¥177b) (Based on the trailing twelve months to September 2025).
So, GS Yuasa has an ROCE of 10%. In absolute terms, that's a satisfactory return, but compared to the Auto Components industry average of 7.6% it's much better.
View our latest analysis for GS Yuasa
In the above chart we have measured GS Yuasa'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 GS Yuasa .
How Are Returns Trending?
The trends we've noticed at GS Yuasa are quite reassuring. The data shows that returns on capital have increased substantially over the last five years to 10%. The amount of capital employed has increased too, by 78%. 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 GS Yuasa's ROCE
A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what GS Yuasa has. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 45% return over the last five years. 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.
Like most companies, GS Yuasa does come with some risks, and we've found 1 warning sign that you should be aware of.
While GS Yuasa isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.
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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.