BrightView Holdings (NYSE:BV) Has More To Do To Multiply In Value Going Forward

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, 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. Having said that, from a first glance at BrightView Holdings (NYSE:BV) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

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. To calculate this metric for BrightView Holdings, this is the formula:

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

0.055 = US$157m ÷ (US$3.4b - US$543m) (Based on the trailing twelve months to September 2024).

Thus, BrightView Holdings has an ROCE of 5.5%. In absolute terms, that's a low return and it also under-performs the Commercial Services industry average of 11%.

See our latest analysis for BrightView Holdings

Above you can see how the current ROCE for BrightView Holdings 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 analyst report for BrightView Holdings .

What Can We Tell From BrightView Holdings' ROCE Trend?

Things have been pretty stable at BrightView Holdings, with its capital employed and returns on that capital staying somewhat the same for the last five years. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. So unless we see a substantial change at BrightView Holdings in terms of ROCE and additional investments being made, we wouldn't hold our breath on it being a multi-bagger.

What We Can Learn From BrightView Holdings' ROCE

In a nutshell, BrightView Holdings has been trudging along with the same returns from the same amount of capital over the last five years. Additionally, the stock's total return to shareholders over the last five years has been flat, which isn't too surprising. All in all, the inherent trends aren't typical of multi-baggers, so if that's what you're after, we think you might have more luck elsewhere.

If you want to continue researching BrightView Holdings, you might be interested to know about the 1 warning sign that our analysis has discovered.

While BrightView Holdings may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.