If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, we've noticed some promising trends at F J Benjamin Holdings (Catalist:F10) so let's look a bit deeper.

Understanding 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. To calculate this metric for F J Benjamin Holdings, this is the formula:

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

0.11 = S$5.4m ÷ (S$85m - S$36m) (Based on the trailing twelve months to December 2022).

Thus, F J Benjamin Holdings has an ROCE of 11%. In absolute terms, that's a satisfactory return, but compared to the Specialty Retail industry average of 8.6% it's much better.

See our latest analysis for F J Benjamin Holdings

Historical performance is a great place to start when researching a stock so above you can see the gauge for F J Benjamin Holdings' ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of F J Benjamin Holdings, check out these free graphs here.

What Can We Tell From F J Benjamin Holdings' ROCE Trend?

Shareholders will be relieved that F J Benjamin Holdings has broken into profitability. The company now earns 11% on its capital, because five years ago it was incurring losses. Interestingly, the capital employed by the business has remained relatively flat, so these higher returns are either from prior investments paying off or increased efficiencies. With no noticeable increase in capital employed, it's worth knowing what the company plans on doing going forward in regards to reinvesting and growing the business. So if you're looking for high growth, you'll want to see a business's capital employed also increasing.

On a related note, the company's ratio of current liabilities to total assets has decreased to 42%, which basically reduces it's funding from the likes of short-term creditors or suppliers. So this improvement in ROCE has come from the business' underlying economics, which is great to see. Nevertheless, there are some potential risks the company is bearing with current liabilities that high, so just keep that in mind.