If you’re searching for the next potential multi-bagger investment, there are key trends to watch for. Look for a company with a growing return on capital employed (ROCE) and increasing capital employed. This indicates that the company has profitable initiatives to reinvest in, making it a compounding machine. Air Canada (TSE:AC) shows some promising trends worth exploring.
ROCE measures the pre-tax profits a company generates from the capital employed in its business. Air Canada’s ROCE is 11%, higher than the industry average of 8.9%. This shows a satisfactory return compared to its peers.
Over the last five years, Air Canada has seen substantial growth in returns on capital, reaching 11%. The company is making more money per dollar of capital used, with capital increasing by 25%. These trends are common among successful multi-baggers.
Despite a 44% decline in stock price over the past five years, the promising trends at Air Canada warrant further investigation. While there are risks involved, the potential for compounding returns is attractive.
Remember, this information is based on historical data and analyst forecasts, and does not constitute financial advice. It’s important to conduct your own research before making investment decisions.