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. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Although, when we looked at Waste Connections (NYSE:WCN), it didn't seem to tick all of these boxes.

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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. To calculate this metric for Waste Connections, this is the formula:

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

0.068 = US$1.3b ÷ (US$20b - US$1.8b) (Based on the trailing twelve months to March 2025).

Thus, Waste Connections has an ROCE of 6.8%. In absolute terms, that's a low return and it also under-performs the Commercial Services industry average of 10%.

View our latest analysis for Waste Connections

In the above chart we have measured Waste Connections' 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 Waste Connections for free.

How Are Returns Trending?

There are better returns on capital out there than what we're seeing at Waste Connections. The company has consistently earned 6.8% for the last five years, and the capital employed within the business has risen 39% in that time. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

In Conclusion...

In summary, Waste Connections has simply been reinvesting capital and generating the same low rate of return as before. Investors must think there's better things to come because the stock has knocked it out of the park, delivering a 122% gain to shareholders who have held over the last five years. Ultimately, if the underlying trends persist, we wouldn't hold our breath on it being a multi-bagger going forward.

If you want to continue researching Waste Connections, you might be interested to know about the 2 warning signs that our analysis has discovered.