Did you know there are some financial metrics that can provide clues of a potential multi-bagger? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. That's why when we briefly looked at CCK Consolidated Holdings Berhad's (KLSE:CCK) ROCE trend, we were pretty happy with what we saw.

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

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on CCK Consolidated Holdings Berhad is:

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

0.11 = RM44m ÷ (RM504m - RM117m) (Based on the trailing twelve months to September 2022).

Therefore, CCK Consolidated Holdings Berhad has an ROCE of 11%. By itself that's a normal return on capital and it's in line with the industry's average returns of 11%.

Check out our latest analysis for CCK Consolidated Holdings Berhad

In the above chart we have measured CCK Consolidated Holdings Berhad'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 CCK Consolidated Holdings Berhad here for free.

How Are Returns Trending?

While the returns on capital are good, they haven't moved much. The company has consistently earned 11% for the last five years, and the capital employed within the business has risen 41% in that time. 11% is a pretty standard return, and it provides some comfort knowing that CCK Consolidated Holdings Berhad has consistently earned this amount. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

The Bottom Line On CCK Consolidated Holdings Berhad's ROCE

In the end, CCK Consolidated Holdings Berhad has proven its ability to adequately reinvest capital at good rates of return. And given the stock has only risen 40% over the last five years, we'd suspect the market is beginning to recognize these trends. So to determine if CCK Consolidated Holdings Berhad is a multi-bagger going forward, we'd suggest digging deeper into the company's other fundamentals.

CCK Consolidated Holdings Berhad does have some risks though, and we've spotted 1 warning sign for CCK Consolidated Holdings Berhad that you might be interested in.