What trends should we look for it we want to identify stocks that can multiply in value over the long term? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount 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. With that in mind, the ROCE of Morimatsu International Holdings (HKG:2155) looks great, so lets see what the trend can tell us.
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. To calculate this metric for Morimatsu International Holdings, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.20 = CN¥952m ÷ (CN¥8.9b - CN¥4.3b) (Based on the trailing twelve months to December 2023).
So, Morimatsu International Holdings has an ROCE of 20%. That's a fantastic return and not only that, it outpaces the average of 8.3% earned by companies in a similar industry.
SEHK:2155 Return on Capital Employed June 27th 2024
Above you can see how the current ROCE for Morimatsu International Holdings compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Morimatsu International Holdings for free.
How Are Returns Trending?
We like the trends that we're seeing from Morimatsu International Holdings. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 20%. The amount of capital employed has increased too, by 210%. So we're very much inspired by what we're seeing at Morimatsu International Holdings thanks to its ability to profitably reinvest capital.
One more thing to note, Morimatsu International Holdings has decreased current liabilities to 48% of total assets over this period, which effectively reduces the amount of funding from suppliers or short-term creditors. Therefore we can rest assured that the growth in ROCE is a result of the business' fundamental improvements, rather than a cooking class featuring this company's books. Nevertheless, there are some potential risks the company is bearing with current liabilities that high, so just keep that in mind.
The Bottom Line
All in all, it's terrific to see that Morimatsu International Holdings is reaping the rewards from prior investments and is growing its capital base. And since the stock has fallen 33% over the last three years, there might be an opportunity here. That being the case, research into the company's current valuation metrics and future prospects seems fitting.
One final note, you should learn about the 2 warning signs we've spotted with Morimatsu International Holdings (including 1 which is a bit concerning) .
High returns are a key ingredient to strong performance, so check out our free list ofstocks earning high returns on equity with solid balance sheets.
Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
長期的に価値が倍増する可能性のある株式を特定するために、どのようなトレンドを見る必要がありますか?理想的には、ビジネスは2つのトレンドを示すことがあります。第1に、投下資本利益率(ROCE)が増加し、第2に、投下資本額が増加することです。これを見ると、一般的に、優れたビジネスモデルとサワリ投資機会が豊富な企業であることを意味します。 とは言っても、Waste Connections (NYSE:WCN)を初めて見る限り、リターンのトレンドに対して熱心になることはできませんが、もう少し深く見てみましょう。資本利回り (ROCE)とは何ですか?わからない方には、ROCEは企業が事業に使用する資本から、税引き前利益をどれだけ生成できるかを測定します。アナリストは以下の式を使用して、Bumi Armada BerhadのROCEを計算します。「ROCE = 利息や税金を除いた利益 (EBIT) ÷ (総資産 - 流動負債)」。現在、Bumi Armada BerhadのROCEは12%です。それは、資本利回りの通常のリターンであり、エネルギーサービス業界が生成した9.8%のリターンに近い値です。Bumi Armada Berhadが前のROCEと前のパフォーマンスを比較した上図では、将来のROCEがより重要であるとされています。もし興味がある場合は、Bumi Armada Berhadの無料アナリストレポートをご覧いただけます。基本的に、これは企業が利益を生み出し続けることができる収益力があり、複合機としての特性である資本利用率を意味します。そのため、森松国際ホールディングス(HKG:2155)のROCE(資本利用率)は見事ですので、そのトレンドを見てみましょう。
オーストラリアでは、moomooの投資商品及びサービスはMoomoo Securities Australia Limitedによって提供され、オーストラリア証券投資委員会(ASIC)の管理を受けております(AFSL No. 224663)。「金融サービスガイド」、「利用規約」、「プライバシーポリシー」などの詳細は、Moomoo Securities Australia Limitedのウェブサイトhttps://www.moomoo.com/auでご確認いただけます。
オーストラリアでは、moomooの投資商品及びサービスはMoomoo Securities Australia Limitedによって提供され、オーストラリア証券投資委員会(ASIC)の管理を受けております(AFSL No. 224663)。「金融サービスガイド」、「利用規約」、「プライバシーポリシー」などの詳細は、Moomoo Securities Australia Limitedのウェブサイトhttps://www.moomoo.com/auでご確認いただけます。