Returns On Capital Are Showing Encouraging Signs At Toyo Seikan Group Holdings (TSE:5901)
If you're looking for a multi-bagger, there's a few things to keep an eye out for. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, we've noticed some promising trends at Toyo Seikan Group Holdings (TSE:5901) so let's look a bit deeper.
Return On Capital Employed (ROCE): What Is It?
If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Toyo Seikan Group Holdings is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.052 = JP¥45b ÷ (JP¥1.2t - JP¥310b) (Based on the trailing twelve months to September 2025).
Therefore, Toyo Seikan Group Holdings has an ROCE of 5.2%. In absolute terms, that's a low return but it's around the Packaging industry average of 6.3%.
View our latest analysis for Toyo Seikan Group Holdings
While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how Toyo Seikan Group Holdings has performed in the past in other metrics, you can view this free graph of Toyo Seikan Group Holdings' past earnings, revenue and cash flow.
What Does the ROCE Trend For Toyo Seikan Group Holdings Tell Us?
Toyo Seikan Group Holdings' ROCE growth is quite impressive. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 72% in that same time. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.
What We Can Learn From Toyo Seikan Group Holdings' ROCE
In summary, we're delighted to see that Toyo Seikan Group Holdings has been able to increase efficiencies and earn higher rates of return on the same amount of capital. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.
On a final note, we've found 1 warning sign for Toyo Seikan Group Holdings that we think you should be aware of.
If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.
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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.