Key Takeaways
- Mazda Motor’s return on capital employed (ROCE) has increased to 7.2%, signaling improved profitability.
- Over five years, capital employed has grown by 40%, indicating effective reinvestment strategies.
- Investors have seen a 40% return over the last five years, reflecting positive market expectations for the company.
Understanding ROCE
Return on capital employed (ROCE) serves as an indicator of how efficiently a company generates profits from its capital. In the case of Mazda Motor, the ROCE is calculated as follows:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets – Current Liabilities)
For Mazda, this results in a ROCE of 7.2% based on recent data, which is lower than the industry average of 9.4%.
Evaluating Mazda’s Trends
Despite the low ROCE in absolute terms, it is encouraging to see that it has improved over the last five years, growing from a lower baseline to its current rate. This upward trend in returns, coupled with a significant 40% increase in the amount of capital employed, indicates that Mazda is successfully utilizing its capital to generate greater returns. Such patterns are commonly observed in companies that exhibit strong growth potential.
Investment Prospects
Mazda Motor’s ability to compound returns through consistent reinvestment at higher rates is promising for long-term investors. With shareholders experiencing a notable 40% return in recent years, the outlook remains optimistic. However, it is essential to note that potential investors should remain aware of some risks tied to the company, including three specific warning signs identified by analysts.
Continued scrutiny of these trends will be vital for assessing Mazda’s future performance. For those seeking investment opportunities with solid fundamentals, a list of companies boasting strong earnings and robust balance sheets is available for review.
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