There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, we've noticed some promising trends at BrightSpring Health Services (NASDAQ:BTSG) so let's look a bit deeper.
Return On Capital Employed (ROCE): What Is It?
If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on BrightSpring Health Services is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.093 = US$412m ÷ (US$5.9b - US$1.5b) (Based on the trailing twelve months to June 2025).
So, BrightSpring Health Services has an ROCE of 9.3%. On its own, that's a low figure but it's around the 10% average generated by the Healthcare industry.
See our latest analysis for BrightSpring Health Services
Above you can see how the current ROCE for BrightSpring Health Services 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 BrightSpring Health Services for free.
What Does the ROCE Trend For BrightSpring Health Services Tell Us?
Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. Over the last five years, returns on capital employed have risen substantially to 9.3%. The amount of capital employed has increased too, by 27%. So we're very much inspired by what we're seeing at BrightSpring Health Services thanks to its ability to profitably reinvest capital.
The Key Takeaway
All in all, it's terrific to see that BrightSpring Health Services is reaping the rewards from prior investments and is growing its capital base. And with a respectable 76% awarded to those who held the stock over the last year, you could argue that these developments are starting to get the attention they deserve. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.
If you want to know some of the risks facing BrightSpring Health Services we've found 3 warning signs (1 makes us a bit uncomfortable!) that you should be aware of before investing here.
If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.
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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.