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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. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at WiseTech Global (ASX:WTC) and its trend of ROCE, we really liked what we saw.

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Understanding Return On Capital Employed (ROCE)

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on WiseTech Global is:

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

0.16 = US$276m ÷ (US$2.0b - US$216m) (Based on the trailing twelve months to December 2024).

Thus, WiseTech Global has an ROCE of 16%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Software industry average of 14%.

See our latest analysis for WiseTech Global

Above you can see how the current ROCE for WiseTech Global 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 analyst report for WiseTech Global .

The Trend Of ROCE

We like the trends that we're seeing from WiseTech Global. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 16%. Basically the business is earning more per dollar of capital invested and in addition to that, 145% more capital is being employed now too. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

Our Take On WiseTech Global's ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what WiseTech Global has. Since the stock has returned a staggering 474% to shareholders over the last five years, it looks like investors are recognizing these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.