Returns On Capital At CCL Industries (TSE:CCL.B) Have Stalled

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. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding 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. With that in mind, the ROCE of CCL Industries (TSE:CCL.B) looks decent, right now, so lets see what the trend of returns can tell us.

Return On Capital Employed (ROCE): What Is It?

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. Analysts use this formula to calculate it for CCL Industries:

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

0.12 = CA$883m ÷ (CA$8.7b - CA$1.4b) (Based on the trailing twelve months to March 2023).

Therefore, CCL Industries has an ROCE of 12%. That's a relatively normal return on capital, and it's around the 13% generated by the Packaging industry.

View our latest analysis for CCL Industries

Above you can see how the current ROCE for CCL Industries compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

What The Trend Of ROCE Can Tell Us

While the current returns on capital are decent, they haven't changed much. The company has consistently earned 12% for the last five years, and the capital employed within the business has risen 43% in that time. 12% is a pretty standard return, and it provides some comfort knowing that CCL Industries has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

The Bottom Line On CCL Industries' ROCE

In the end, CCL Industries has proven its ability to adequately reinvest capital at good rates of return. In light of this, the stock has only gained 5.4% over the last five years for shareholders who have owned the stock in this period. So to determine if CCL Industries is a multi-bagger going forward, we'd suggest digging deeper into the company's other fundamentals.

If you're still interested in CCL Industries it's worth checking out our FREE intrinsic value approximation to see if it's trading at an attractive price in other respects.

While CCL Industries isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.