To find a multi-bagger stock, what are the underlying trends we should look for in a business? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base 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. So when we looked at Canlan Ice Sports (TSE:ICE) and its trend of ROCE, we really liked what we saw.
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. The formula for this calculation on Canlan Ice Sports is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.077 = CA$7.2m ÷ (CA$126m - CA$33m) (Based on the trailing twelve months to June 2025).
Therefore, Canlan Ice Sports has an ROCE of 7.7%. On its own, that's a low figure but it's around the 9.0% average generated by the Hospitality industry.
View our latest analysis for Canlan Ice Sports
Historical performance is a great place to start when researching a stock so above you can see the gauge for Canlan Ice Sports' ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Canlan Ice Sports.
What The Trend Of ROCE Can Tell Us
We're delighted to see that Canlan Ice Sports is reaping rewards from its investments and has now broken into profitability. The company now earns 7.7% on its capital, because five years ago it was incurring losses. While returns have increased, the amount of capital employed by Canlan Ice Sports has remained flat over the period. With no noticeable increase in capital employed, it's worth knowing what the company plans on doing going forward in regards to reinvesting and growing the business. Because in the end, a business can only get so efficient.
The Bottom Line On Canlan Ice Sports' ROCE
To sum it up, Canlan Ice Sports is collecting higher returns from the same amount of capital, and that's impressive. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 92% return over the last five years. In light of that, we think it's worth looking further into this stock because if Canlan Ice Sports can keep these trends up, it could have a bright future ahead.
Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 3 warning signs for Canlan Ice Sports (of which 1 doesn't sit too well with us!) that you should know about.
While Canlan Ice Sports isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.
Valuation is complex, but we're here to simplify it.
Discover if Canlan Ice Sports might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.