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What are the early trends we should look for to identify a stock that could multiply in value over the long term? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing 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. Having said that, from a first glance at GDI Integrated Facility Services (TSE:GDI) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.
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What Is 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. Analysts use this formula to calculate it for GDI Integrated Facility Services:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.064 = CA$57m ÷ (CA$1.3b - CA$403m) (Based on the trailing twelve months to March 2025).
Therefore, GDI Integrated Facility Services has an ROCE of 6.4%. In absolute terms, that's a low return but it's around the Commercial Services industry average of 7.2%.
See our latest analysis for GDI Integrated Facility Services
In the above chart we have measured GDI Integrated Facility Services' 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 GDI Integrated Facility Services .
What Does the ROCE Trend For GDI Integrated Facility Services Tell Us?
There are better returns on capital out there than what we're seeing at GDI Integrated Facility Services. Over the past five years, ROCE has remained relatively flat at around 6.4% and the business has deployed 64% more capital into its operations. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.
Our Take On GDI Integrated Facility Services' ROCE
As we've seen above, GDI Integrated Facility Services' returns on capital haven't increased but it is reinvesting in the business. And investors may be recognizing these trends since the stock has only returned a total of 3.2% to shareholders over the last five years. As a result, if you're hunting for a multi-bagger, we think you'd have more luck elsewhere.