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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. That's why when we briefly looked at Nabaltec's (ETR:NTG) ROCE trend, we were pretty happy with what we saw.

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. The formula for this calculation on Nabaltec is:

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

0.10 = €27m ÷ (€291m - €32m) (Based on the trailing twelve months to March 2023).

Therefore, Nabaltec has an ROCE of 10%. By itself that's a normal return on capital and it's in line with the industry's average returns of 9.7%.

See our latest analysis for Nabaltec

Above you can see how the current ROCE for Nabaltec compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Nabaltec.

What Can We Tell From Nabaltec's ROCE Trend?

While the current returns on capital are decent, they haven't changed much. The company has consistently earned 10% for the last five years, and the capital employed within the business has risen 32% in that time. 10% is a pretty standard return, and it provides some comfort knowing that Nabaltec 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 Nabaltec's ROCE

To sum it up, Nabaltec has simply been reinvesting capital steadily, at those decent rates of return. Yet over the last five years the stock has declined 13%, so the decline might provide an opening. For that reason, savvy investors might want to look further into this company in case it's a prime investment.

If you'd like to know about the risks facing Nabaltec, we've discovered 1 warning sign that you should be aware of.

While Nabaltec isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.