Shareholders Would Enjoy A Repeat Of ASICS' (TSE:7936) Recent Growth In Returns

What are the early trends we should look for to identify a stock that could multiply in value over the long term? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. And in light of that, the trends we're seeing at ASICS' (TSE:7936) look very promising so lets take a look.

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Return On Capital Employed (ROCE): What Is It?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on ASICS is:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.37 = JP¥136b ÷ (JP¥554b - JP¥189b) (Based on the trailing twelve months to September 2025).

Therefore, ASICS has an ROCE of 37%. In absolute terms that's a great return and it's even better than the Luxury industry average of 4.0%.

View our latest analysis for ASICS

Above you can see how the current ROCE for ASICS 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 ASICS for free.

What Does the ROCE Trend For ASICS Tell Us?

Investors would be pleased with what's happening at ASICS. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 37%. Basically the business is earning more per dollar of capital invested and in addition to that, 38% more capital is being employed now too. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

On a side note, we noticed that the improvement in ROCE appears to be partly fueled by an increase in current liabilities. Essentially the business now has suppliers or short-term creditors funding about 34% of its operations, which isn't ideal. Keep an eye out for future increases because when the ratio of current liabilities to total assets gets particularly high, this can introduce some new risks for the business.

What We Can Learn From ASICS' ROCE

To sum it up, ASICS has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. In light of that, we think it's worth looking further into this stock because if ASICS can keep these trends up, it could have a bright future ahead.

On the other side of ROCE, we have to consider valuation. That's why we have a FREE intrinsic value estimation for 7936 on our platform that is definitely worth checking out.

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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.