Nasdaq
华尔街日报Returns On Capital At DMG Mori (TSE:6141) Have Stalled
Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. However, after briefly looking over the numbers, we don't think DMG Mori (TSE:6141) has the makings of a multi-bagger going forward, but let's have a look at why that may be.
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. The formula for this calculation on DMG Mori is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.05 = JP¥21b ÷ (JP¥827b - JP¥412b) (Based on the trailing twelve months to September 2025).
Thus, DMG Mori has an ROCE of 5.0%. Ultimately, that's a low return and it under-performs the Machinery industry average of 8.0%.
See our latest analysis for DMG Mori
In the above chart we have measured DMG Mori's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for DMG Mori .
What Can We Tell From DMG Mori's ROCE Trend?
In terms of DMG Mori's historical ROCE trend, it doesn't exactly demand attention. The company has consistently earned 5.0% for the last five years, and the capital employed within the business has risen 78% in that time. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.
Another thing to note, DMG Mori has a high ratio of current liabilities to total assets of 50%. 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. Ideally we'd like to see this reduce as that would mean fewer obligations bearing risks.
Our Take On DMG Mori's ROCE
Long story short, while DMG Mori has been reinvesting its capital, the returns that it's generating haven't increased. Since the stock has gained an impressive 95% over the last five years, investors must think there's better things to come. Ultimately, if the underlying trends persist, we wouldn't hold our breath on it being a multi-bagger going forward.
Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 3 warning signs for DMG Mori (of which 2 can't be ignored!) that you should know about.
While DMG Mori may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.
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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.