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If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. In light of that, when we looked at Winpak (TSE:WPK) and its ROCE trend, we weren't exactly thrilled.
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Return On Capital Employed (ROCE): What Is It?
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 Winpak is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.14 = US$195m ÷ (US$1.5b - US$120m) (Based on the trailing twelve months to March 2025).
Therefore, Winpak has an ROCE of 14%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Packaging industry average of 13%.
View our latest analysis for Winpak
Above you can see how the current ROCE for Winpak 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 Winpak .
So How Is Winpak's ROCE Trending?
There hasn't been much to report for Winpak's returns and its level of capital employed because both metrics have been steady for the past five years. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. With that in mind, unless investment picks up again in the future, we wouldn't expect Winpak to be a multi-bagger going forward.
The Key Takeaway
We can conclude that in regards to Winpak's returns on capital employed and the trends, there isn't much change to report on. And with the stock having returned a mere 11% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. So if you're looking for a multi-bagger, the underlying trends indicate you may have better chances elsewhere.
While Winpak doesn't shine too bright in this respect, it's still worth seeing if the company is trading at attractive prices. You can find that out with our FREE intrinsic value estimation for WPK on our platform.