Returns On Capital Are Showing Encouraging Signs At Quantum Foods Holdings (JSE:QFH)

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. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So when we looked at Quantum Foods Holdings (JSE:QFH) and its trend of ROCE, we really liked what we saw.

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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. Analysts use this formula to calculate it for Quantum Foods Holdings:

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

0.14 = R377m ÷ (R3.4b - R763m) (Based on the trailing twelve months to March 2025).

So, Quantum Foods Holdings has an ROCE of 14%. By itself that's a normal return on capital and it's in line with the industry's average returns of 14%.

Check out our latest analysis for Quantum Foods Holdings

Historical performance is a great place to start when researching a stock so above you can see the gauge for Quantum Foods Holdings' ROCE against it's prior returns. If you'd like to look at how Quantum Foods Holdings has performed in the past in other metrics, you can view this free graph of Quantum Foods Holdings' past earnings, revenue and cash flow.

How Are Returns Trending?

Investors would be pleased with what's happening at Quantum Foods Holdings. The data shows that returns on capital have increased substantially over the last five years to 14%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 22%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

The Bottom Line On Quantum Foods Holdings' ROCE

All in all, it's terrific to see that Quantum Foods Holdings is reaping the rewards from prior investments and is growing its capital base. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. In light of that, we think it's worth looking further into this stock because if Quantum Foods Holdings can keep these trends up, it could have a bright future ahead.

If you'd like to know more about Quantum Foods Holdings, we've spotted 3 warning signs, and 2 of them shouldn't be ignored.

While Quantum Foods Holdings 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.