To find a multi-bagger stock, what are the underlying trends we should look for in a business? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount 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, we've noticed some promising trends at Bumble (NASDAQ:BMBL) so let's look a bit deeper.
Our free stock report includes 1 warning sign investors should be aware of before investing in Bumble. Read for free now.Return On Capital Employed (ROCE): What Is It?
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. Analysts use this formula to calculate it for Bumble:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.085 = US$202m ÷ (US$2.5b - US$119m) (Based on the trailing twelve months to March 2025).
Thus, Bumble has an ROCE of 8.5%. In absolute terms, that's a low return, but it's much better than the Interactive Media and Services industry average of 6.7%.
See our latest analysis for Bumble
Above you can see how the current ROCE for Bumble 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 Bumble .
What The Trend Of ROCE Can Tell Us
Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. The data shows that returns on capital have increased substantially over the last five years to 8.5%. Basically the business is earning more per dollar of capital invested and in addition to that, 106% more capital is being employed now too. So we're very much inspired by what we're seeing at Bumble thanks to its ability to profitably reinvest capital.
The Bottom Line
A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Bumble has. However the stock is down a substantial 75% in the last three years so there could be other areas of the business hurting its prospects. In any case, we believe the economic trends of this company are positive and looking into the stock further could prove rewarding.
Bumble does have some risks though, and we've spotted 1 warning sign for Bumble that you might be interested in.
While Bumble 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.