COMSYS Holdings (TSE:1721) has more to do to multiply its value in the future

To find a multi-bagger stock, what underlying trends should we look for in a company? Typically, we want to identify a trend of growth to return on the capital employed (ROCE) and in parallel a growing base of the capital employed. Ultimately, this shows that this is a company that reinvests profits with increasing returns. Against this background, the ROCE of COMSYS investments (TSE:1721) is looking good at the moment, so let’s wait and see what the yield trend has in store for us.

Understanding Return on Capital Employed (ROCE)

For those who don’t know, ROCE is a measure of a company’s annual pre-tax profit (its return) relative to the capital employed in the company. The formula for this calculation at COMSYS Holdings is:

Return on capital = earnings before interest and taxes (EBIT) ÷ (total assets – current liabilities)

0.10 = 39 billion JP¥ ÷ (515 billion JP¥ – 124 billion JP¥) (Based on the last twelve months to March 2024).

So, COMSYS Holdings has a ROCE of 10%. This is a normal return in itself, but it is much better than the 7.8% achieved in the construction industry.

Check out our latest analysis for COMSYS Holdings

In the chart above, we have compared COMSYS Holdings’ ROCE with its past performance, but the future is arguably more important. If you are interested, you can check out analyst forecasts in our free Analyst report for COMSYS Holdings.

So how is COMSYS Holdings’ ROCE developing?

While current returns on capital are decent, they haven’t changed much. The company has consistently returned 10% over the past five years and capital employed in the company has grown by 21% in that time. 10% is a fairly normal return and there is some comfort in knowing that COMSYS Holdings has consistently returned that amount. Over long periods of time, such returns may not be too exciting, but with consistency, they can pay off in terms of share price returns.

The most important things to take away

The most important thing to remember is that COMSYS Holdings has demonstrated its ability to consistently reinvest while generating respectable returns. With that in mind, the stock has gained just 38% over the past five years for shareholders who owned the stock during that time period. Therefore, based on the trends we’re observing, we recommend taking a closer look at this stock to see if it has what it takes to be a multibagger.

If you are still interested in COMSYS Holdings, it is worth taking a look at our FREE intrinsic value approximation for 1721 to see if it is trading at an attractive price in other respects as well.

For those who like to invest in solid companies, look at that free List of companies with solid balance sheets and high returns on equity.

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This Simply Wall St article is of a general nature. We comment based solely on historical data and analyst forecasts, using an unbiased methodology. Our articles do not constitute financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Simply Wall St does not hold any of the stocks mentioned.

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