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Returns On Capital Are Showing Encouraging Signs At Aseed HoldingsLtd (TSE:9959)
Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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. So when we looked at Aseed HoldingsLtd (TSE:9959) and its trend of ROCE, we really liked what we saw.
Return On Capital Employed (ROCE): What Is It?
For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for Aseed HoldingsLtd:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.077 = JP¥843m ÷ (JP¥20b - JP¥9.3b) (Based on the trailing twelve months to September 2025).
Therefore, Aseed HoldingsLtd has an ROCE of 7.7%. In absolute terms, that's a low return but it's around the Consumer Retailing industry average of 9.4%.
View our latest analysis for Aseed HoldingsLtd
Historical performance is a great place to start when researching a stock so above you can see the gauge for Aseed HoldingsLtd's ROCE against it's prior returns. If you'd like to look at how Aseed HoldingsLtd has performed in the past in other metrics, you can view this free graph of Aseed HoldingsLtd's past earnings, revenue and cash flow.
The Trend Of ROCE
We're glad to see that ROCE is heading in the right direction, even if it is still low at the moment. Over the last five years, returns on capital employed have risen substantially to 7.7%. The amount of capital employed has increased too, by 41%. So we're very much inspired by what we're seeing at Aseed HoldingsLtd thanks to its ability to profitably reinvest capital.
On a separate but related note, it's important to know that Aseed HoldingsLtd has a current liabilities to total assets ratio of 46%, which we'd consider pretty high. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. While it's not necessarily a bad thing, it can be beneficial if this ratio is lower.
Our Take On Aseed HoldingsLtd's ROCE
In summary, it's great to see that Aseed HoldingsLtd can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 95% return over the last five years. Therefore, we think it would be worth your time to check if these trends are going to continue.
If you'd like to know more about Aseed HoldingsLtd, we've spotted 3 warning signs, and 1 of them shouldn't be ignored.
While Aseed HoldingsLtd 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.