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. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. That's why when we briefly looked at Jardine Cycle & Carriage's (SGX:C07) ROCE trend, we were pretty happy with what we saw.

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 Jardine Cycle & Carriage:

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

0.12 = US$2.7b ÷ (US$32b - US$8.9b) (Based on the trailing twelve months to June 2024).

So, Jardine Cycle & Carriage has an ROCE of 12%. In absolute terms, that's a satisfactory return, but compared to the Industrials industry average of 6.5% it's much better.

View our latest analysis for Jardine Cycle & Carriage

Above you can see how the current ROCE for Jardine Cycle & Carriage 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 Jardine Cycle & Carriage for free.

While the returns on capital are good, they haven't moved much. Over the past five years, ROCE has remained relatively flat at around 12% and the business has deployed 21% more capital into its operations. Since 12% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

The main thing to remember is that Jardine Cycle & Carriage has proven its ability to continually reinvest at respectable rates of return. In light of this, the stock has only gained 8.3% over the last five years for shareholders who have owned the stock in this period. So because of the trends we're seeing, we'd recommend looking further into this stock to see if it has the makings of a multi-bagger.