What are the early trends we should look for to identify a stock that could multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. However, after investigating Bell Food Group (VTX:BELL), we don't think it's current trends fit the mold of a multi-bagger.

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. To calculate this metric for Bell Food Group, this is the formula:

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

0.07 = CHF165m ÷ (CHF3.1b - CHF797m) (Based on the trailing twelve months to June 2024).

Therefore, Bell Food Group has an ROCE of 7.0%. In absolute terms, that's a low return and it also under-performs the Food industry average of 12%.

See our latest analysis for Bell Food Group

In the above chart we have measured Bell Food Group's 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 Bell Food Group .

What Can We Tell From Bell Food Group's ROCE Trend?

Things have been pretty stable at Bell Food Group, with its capital employed and returns on that capital staying somewhat the same for the last five years. It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. So don't be surprised if Bell Food Group doesn't end up being a multi-bagger in a few years time. This probably explains why Bell Food Group is paying out 34% of its income to shareholders in the form of dividends. Unless businesses have highly compelling growth opportunities, they'll typically return some money to shareholders.

The Key Takeaway

We can conclude that in regards to Bell Food Group's returns on capital employed and the trends, there isn't much change to report on. Unsurprisingly, the stock has only gained 11% over the last five years, which potentially indicates that investors are accounting for this going forward. As a result, if you're hunting for a multi-bagger, we think you'd have more luck elsewhere.