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. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing 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. So on that note, Singapore Airlines (SGX:C6L) looks quite promising in regards to its trends of return on capital.

Understanding Return On Capital Employed (ROCE)

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for Singapore Airlines:

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

0.07 = S$2.0b ÷ (S$41b - S$13b) (Based on the trailing twelve months to September 2024).

So, Singapore Airlines has an ROCE of 7.0%. On its own, that's a low figure but it's around the 8.3% average generated by the Airlines industry.

Check out our latest analysis for Singapore Airlines

SGX:C6L Return on Capital Employed March 6th 2025

Above you can see how the current ROCE for Singapore Airlines compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Singapore Airlines .

What Does the ROCE Trend For Singapore Airlines Tell Us?

We're glad to see that ROCE is heading in the right direction, even if it is still low at the moment. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 7.0%. 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 24%. So we're very much inspired by what we're seeing at Singapore Airlines thanks to its ability to profitably reinvest capital.

The Bottom Line

To sum it up, Singapore Airlines has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Since the stock has returned a solid 46% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. In light of that, we think it's worth looking further into this stock because if Singapore Airlines can keep these trends up, it could have a bright future ahead.

Singapore Airlines does have some risks, we noticed 2 warning signs (and 1 which is concerning) we think you should know about.

While Singapore Airlines 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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