If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. That's why when we briefly looked at IDEXX Laboratories' (NASDAQ:IDXX) ROCE trend, we were very happy with what we saw.

Understanding Return On Capital Employed (ROCE)

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for IDEXX Laboratories:

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

0.50 = US$1.1b ÷ (US$3.4b - US$1.1b) (Based on the trailing twelve months to June 2024).

Thus, IDEXX Laboratories has an ROCE of 50%. That's a fantastic return and not only that, it outpaces the average of 9.2% earned by companies in a similar industry.

View our latest analysis for IDEXX Laboratories

In the above chart we have measured IDEXX Laboratories' prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for IDEXX Laboratories .

What Can We Tell From IDEXX Laboratories' ROCE Trend?

In terms of IDEXX Laboratories' history of ROCE, it's quite impressive. The company has consistently earned 50% for the last five years, and the capital employed within the business has risen 108% in that time. With returns that high, it's great that the business can continually reinvest its money at such appealing rates of return. If IDEXX Laboratories can keep this up, we'd be very optimistic about its future.

The Bottom Line On IDEXX Laboratories' ROCE

In the end, the company has proven it can reinvest it's capital at high rates of returns, which you'll remember is a trait of a multi-bagger. And the stock has followed suit returning a meaningful 68% to shareholders over the last five years. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

Before jumping to any conclusions though, we need to know what value we're getting for the current share price. That's where you can check out our FREE intrinsic value estimation for IDXX that compares the share price and estimated value.