Capital Investments At Marzetti (NASDAQ:MZTI) Point To A Promising Future

To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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. That's why when we briefly looked at Marzetti's (NASDAQ:MZTI) ROCE trend, we were very happy with what we saw.

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Understanding Return On Capital Employed (ROCE)

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 Marzetti is:

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

0.21 = US$229m ÷ (US$1.3b - US$186m) (Based on the trailing twelve months to June 2025).

So, Marzetti has an ROCE of 21%. That's a fantastic return and not only that, it outpaces the average of 10% earned by companies in a similar industry.

View our latest analysis for Marzetti

Above you can see how the current ROCE for Marzetti 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 Marzetti .

What The Trend Of ROCE Can Tell Us

We'd be pretty happy with returns on capital like Marzetti. Over the past five years, ROCE has remained relatively flat at around 21% and the business has deployed 26% more capital into its operations. With returns that high, it's great that the business can continually reinvest its money at such appealing rates of return. If these trends can continue, it wouldn't surprise us if the company became a multi-bagger.

The Bottom Line

In short, we'd argue Marzetti has the makings of a multi-bagger since its been able to compound its capital at very profitable rates of return. However, over the last five years, the stock has only delivered a 5.8% return to shareholders who held over that period. So to determine if Marzetti is a multi-bagger going forward, we'd suggest digging deeper into the company's other fundamentals.

On the other side of ROCE, we have to consider valuation. That's why we have a FREE intrinsic value estimation for MZTI on our platform that is definitely worth checking out.

Marzetti is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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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.