If you’re looking for a multi-bagger, there’s a few things to keep an eye out for. 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. So on that note, Hokkaido Electric Power Company (TSE:9509) looks quite promising in regards to its trends of return on capital.
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What Is Return On Capital Employed (ROCE)?
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 Hokkaido Electric Power Company:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets – Current Liabilities)
0.043 = JP¥76b ÷ (JP¥2.2t – JP¥484b) (Based on the trailing twelve months to March 2025).
Therefore, Hokkaido Electric Power Company has an ROCE of 4.3%. Even though it’s in line with the industry average of 4.3%, it’s still a low return by itself.
Check out our latest analysis for Hokkaido Electric Power Company
TSE:9509 Return on Capital Employed July 23rd 2025
In the above chart we have measured Hokkaido Electric Power Company’s prior ROCE against its prior performance, but the future is arguably more important. If you’d like, you can check out the forecasts from the analysts covering Hokkaido Electric Power Company for free.
What Does the ROCE Trend For Hokkaido Electric Power Company Tell Us?
While the ROCE isn’t as high as some other companies out there, it’s great to see it’s on the up. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 58% over the last five years. So it’s likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn’t changed considerably. On that front, things are looking good so it’s worth exploring what management has said about growth plans going forward.
The Key Takeaway
To bring it all together, Hokkaido Electric Power Company has done well to increase the returns it’s generating from its capital employed. Since the stock has returned a staggering 139% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it’s worth looking further into this stock because if Hokkaido Electric Power Company can keep these trends up, it could have a bright future ahead.
Hokkaido Electric Power Company does come with some risks though, we found 5 warning signs in our investment analysis, and 2 of those shouldn’t be ignored…
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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.
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