To find a multi-bagger stock, what are the underlying trends we should look for in a business? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Although, when we looked at Bloomin' Brands (NASDAQ:BLMN), it didn't seem to tick all of these boxes.

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

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for Bloomin' Brands:

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

0.085 = US$207m ÷ (US$3.4b - US$952m) (Based on the trailing twelve months to December 2024).

So, Bloomin' Brands has an ROCE of 8.5%. On its own, that's a low figure but it's around the 10.0% average generated by the Hospitality industry.

View our latest analysis for Bloomin' Brands

Above you can see how the current ROCE for Bloomin' Brands compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Bloomin' Brands .

The Trend Of ROCE

There hasn't been much to report for Bloomin' Brands' returns and its level of capital employed because both metrics have been steady for the past five years. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. So don't be surprised if Bloomin' Brands doesn't end up being a multi-bagger in a few years time. With fewer investment opportunities, it makes sense that Bloomin' Brands has been paying out a decent 55% of its earnings to shareholders. Given the business isn't reinvesting in itself, it makes sense to distribute a portion of earnings among shareholders.

What We Can Learn From Bloomin' Brands' ROCE

In a nutshell, Bloomin' Brands has been trudging along with the same returns from the same amount of capital over the last five years. And with the stock having returned a mere 2.4% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. So if you're looking for a multi-bagger, the underlying trends indicate you may have better chances elsewhere.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 3 warning signs for Bloomin' Brands (of which 1 is a bit unpleasant!) that you should know about.

While Bloomin' 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.