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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Speaking of which, we noticed some great changes in Dynacor Group's (TSE:DNG) returns on capital, so let's have a look.

Understanding Return On Capital Employed (ROCE)

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 Dynacor Group:

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

0.25 = US$25m ÷ (US$115m - US$15m) (Based on the trailing twelve months to June 2024).

So, Dynacor Group has an ROCE of 25%. In absolute terms that's a great return and it's even better than the Metals and Mining industry average of 3.1%.

Check out our latest analysis for Dynacor Group

In the above chart we have measured Dynacor Group's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Dynacor Group .

What Does the ROCE Trend For Dynacor Group Tell Us?

We like the trends that we're seeing from Dynacor Group. The data shows that returns on capital have increased substantially over the last five years to 25%. 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 60%. So we're very much inspired by what we're seeing at Dynacor Group thanks to its ability to profitably reinvest capital.

The Bottom Line

All in all, it's terrific to see that Dynacor Group 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 Dynacor Group can keep these trends up, it could have a bright future ahead.

On a final note, we've found 1 warning sign for Dynacor Group that we think you should be aware of.