Return trends at Nakanishi (Tse: 7716) are not appealing

What trends should we seek to identify shares that can multiply a value in the long term? First, we want to see a proven return employed on Capital (Roce), which increases, and secondly an expansion base employed by capital. Ultimately, this shows that it is a business that reinforces profits with increasing return. Therefore, if we looked briefly Nakanishi (Tse: 7716) Roce Trend, we were pretty happy with what we saw.

Capital return (Roce): What is it?

For those who do not know, Roce is a measure of the annual input tax gain in a company (its return) compared to the capital employed in business. The formula for this calculation of Nakanishi is:

Capital returns employed = profits before interest and taxes (EBIT) ÷ (total assets – current liabilities)

0.11 = JP ¥ 15B ÷ (JP ¥ 158B – JP ¥ 28B) (Based on the following twelve months to December 2024).

Therefore, Nakanishi has a redness of 11%. This is a fairly standard return and corresponds to the industry average of 11%.

Take a look at our latest analysis for Nakanishi

In the table above we measured Nakanishi's former Roce against its previous performance, but the future is probably more important. If you want, you can cover the forecasts of the analysts, the Nakanishi free.

What Roce's trend can tell us

The trend of Roce does not notice much, but returns overall. The company has earned 11% in the past five years, and the capital employed in business has increased by 78% during this time. 11% is a fairly standard return and offers some comfort when you know that Nakanishi has made this amount consistently. Long periods of time, like this, may not be too exciting, but with consistency you can pay in relation to the share yields.

While the change in the ROCE trend does not scream for attention, it is interesting that the current liabilities have actually increased in the past five years. This is fascinating, because if the current liabilities did not increase to 18% of the total assets, this Roce would probably be less than 11% because the total capital would be higher. The 11% Roce could be even lower if the current liabilities were not 18% of the total assets, since the formula would be used a larger basis of total capital. In this sense, it is only cautious if this relationship increases in the future, because if it becomes particularly high, this brings some new risk elements with it.

The end result

The main thing that you should remember is that Nakanishi has proven its ability to continuously reinvest with respectable return. And since the stock has risen sharply in the past five years, the market seems to be expected that this trend will continue. Although the stock may be “more expensive” than before, we believe that the strong foundations justify this share for further research.

We found separately 2 warning signs for Nakanishi You will probably want to know.

While Nakanishi may not currently achieve the highest returns, we have put together a list of companies that currently achieve more than 25% return on equity. Take a look at that free List here.

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This article by Simply Wall Street is a general nature. We offer comments based on historical data and analyst forecasts that only use an impartial methodology, and our articles are not intended as financial advice. It is not a recommendation to buy or sell shares, and does not take into account your goals or your financial situation. We would like to use a long -term focused analysis by basic data. Note that our analysis may not take into account the latest record -sensitive announcements or qualitative material. Simply Wall Street has no position in the stocks mentioned.