We Like These Underlying Return On Capital Trends At BJ's Restaurants (NASDAQ:BJRI)

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. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. With that in mind, we've noticed some promising trends at BJ's Restaurants (NASDAQ:BJRI) so let's look a bit deeper.

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Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for BJ's Restaurants:

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

0.06 = US$50m ÷ (US$1.0b - US$194m) (Based on the trailing twelve months to September 2025).

Therefore, BJ's Restaurants has an ROCE of 6.0%. Ultimately, that's a low return and it under-performs the Hospitality industry average of 11%.

See our latest analysis for BJ's Restaurants

Above you can see how the current ROCE for BJ's Restaurants compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering BJ's Restaurants for free.

What Does the ROCE Trend For BJ's Restaurants Tell Us?

Shareholders will be relieved that BJ's Restaurants has broken into profitability. The company was generating losses five years ago, but has managed to turn it around and as we saw earlier is now earning 6.0%, which is always encouraging. While returns have increased, the amount of capital employed by BJ's Restaurants 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. So if you're looking for high growth, you'll want to see a business's capital employed also increasing.

In Conclusion...

To bring it all together, BJ's Restaurants has done well to increase the returns it's generating from its capital employed. Since the stock has only returned 12% to shareholders over the last five years, the promising fundamentals may not be recognized yet by investors. So exploring more about this stock could uncover a good opportunity, if the valuation and other metrics stack up.

One more thing to note, we've identified 1 warning sign with BJ's Restaurants and understanding this should be part of your investment process.

While BJ's Restaurants 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.