If you're looking for a multi-bagger, there's a few things to keep an eye out for. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, 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. Speaking of which, we noticed some great changes in Lifetime Brands' (NASDAQ:LCUT) returns on capital, so let's have a look.

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. To calculate this metric for Lifetime Brands, this is the formula:

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

0.057 = US$29m ÷ (US$669m - US$170m) (Based on the trailing twelve months to September 2024).

So, Lifetime Brands has an ROCE of 5.7%. Ultimately, that's a low return and it under-performs the Consumer Durables industry average of 15%.

Check out our latest analysis for Lifetime Brands

Above you can see how the current ROCE for Lifetime Brands 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 Lifetime Brands .

What Does the ROCE Trend For Lifetime Brands Tell Us?

You'd find it hard not to be impressed with the ROCE trend at Lifetime Brands. The data shows that returns on capital have increased by 21% over the trailing five years. The company is now earning US$0.06 per dollar of capital employed. In regards to capital employed, Lifetime Brands appears to been achieving more with less, since the business is using 32% less capital to run its operation. A business that's shrinking its asset base like this isn't usually typical of a soon to be multi-bagger company.

The Bottom Line

In the end, Lifetime Brands has proven it's capital allocation skills are good with those higher returns from less amount of capital. Investors may not be impressed by the favorable underlying trends yet because over the last five years the stock has only returned 19% to shareholders. So with that in mind, we think the stock deserves further research.

If you'd like to know about the risks facing Lifetime Brands, we've discovered 1 warning sign that you should be aware of.

While Lifetime Brands isn't earning the highest return, check out this free list of companies that are 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.