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. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. 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, the ROCE of John B. Sanfilippo & Son (NASDAQ:JBSS) looks decent, right now, so lets see what the trend of returns can tell us.

Understanding 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. The formula for this calculation on John B. Sanfilippo & Son is:

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

0.19 = US$73m ÷ (US$519m - US$140m) (Based on the trailing twelve months to September 2024).

So, John B. Sanfilippo & Son has an ROCE of 19%. In absolute terms, that's a satisfactory return, but compared to the Food industry average of 11% it's much better.

View our latest analysis for John B. Sanfilippo & Son

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how John B. Sanfilippo & Son has performed in the past in other metrics, you can view this free graph of John B. Sanfilippo & Son's past earnings, revenue and cash flow.

What Can We Tell From John B. Sanfilippo & Son's ROCE Trend?

While the current returns on capital are decent, they haven't changed much. Over the past five years, ROCE has remained relatively flat at around 19% and the business has deployed 31% more capital into its operations. Since 19% 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.

What We Can Learn From John B. Sanfilippo & Son's ROCE

To sum it up, John B. Sanfilippo & Son has simply been reinvesting capital steadily, at those decent rates of return. However, over the last five years, the stock has only delivered a 14% return to shareholders who held over that period. So to determine if John B. Sanfilippo & Son is a multi-bagger going forward, we'd suggest digging deeper into the company's other fundamentals.

One more thing to note, we've identified 1 warning sign with John B. Sanfilippo & Son and understanding this should be part of your investment process.

While John B. Sanfilippo & Son 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.