Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base 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. With that in mind, the ROCE of Sysco (NYSE:SYY) looks attractive right now, so lets see what the trend of returns can tell us.

Return On Capital Employed (ROCE): What Is It?

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 Sysco:

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

0.22 = US$3.5b ÷ (US$25b - US$9.6b) (Based on the trailing twelve months to December 2024).

Thus, Sysco has an ROCE of 22%. In absolute terms that's a great return and it's even better than the Consumer Retailing industry average of 11%.

See our latest analysis for Sysco

Above you can see how the current ROCE for Sysco 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 Sysco for free.

What Does the ROCE Trend For Sysco Tell Us?

We'd be pretty happy with returns on capital like Sysco. The company has consistently earned 22% for the last five years, and the capital employed within the business has risen 27% in that time. With returns that high, it's great that the business can continually reinvest its money at such appealing rates of return. If Sysco can keep this up, we'd be very optimistic about its future.

In Conclusion...

In summary, we're delighted to see that Sysco has been compounding returns by reinvesting at consistently high rates of return, as these are common traits of a multi-bagger. In light of this, the stock has only gained 8.4% over the last five years for shareholders who have owned the stock in this period. That's why it could be worth your time looking into this stock further to discover if it has more traits of a multi-bagger.

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

High returns are a key ingredient to strong performance, so check out our free list ofstocks 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.