If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base 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. However, after investigating Boston Beer Company (NYSE:SAM), we don't think it's current trends fit the mold of a multi-bagger.

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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 Boston Beer Company is:

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

0.15 = US$152m ÷ (US$1.3b - US$232m) (Based on the trailing twelve months to December 2024).

So, Boston Beer Company has an ROCE of 15%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Beverage industry average of 16%.

Check out our latest analysis for Boston Beer Company

Above you can see how the current ROCE for Boston Beer Company 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 Boston Beer Company for free.

So How Is Boston Beer Company's ROCE Trending?

Over the past five years, Boston Beer Company's ROCE and capital employed have both remained mostly flat. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. So unless we see a substantial change at Boston Beer Company in terms of ROCE and additional investments being made, we wouldn't hold our breath on it being a multi-bagger.

The Key Takeaway

In a nutshell, Boston Beer Company has been trudging along with the same returns from the same amount of capital over the last five years. Since the stock has declined 45% over the last five years, investors may not be too optimistic on this trend improving either. Therefore based on the analysis done in this article, we don't think Boston Beer Company has the makings of a multi-bagger.

One more thing, we've spotted 2 warning signs facing Boston Beer Company that you might find interesting.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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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.