Brambles (ASX:BXB) Shareholders Will Want The ROCE Trajectory To Continue
Did you know there are some financial metrics that can provide clues of a potential multi-bagger? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. With that in mind, we've noticed some promising trends at Brambles (ASX:BXB) so let's look a bit deeper.
What Is Return On Capital Employed (ROCE)?
If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Brambles is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.19 = US$1.3b ÷ (US$9.6b - US$2.8b) (Based on the trailing twelve months to June 2025).
Thus, Brambles has an ROCE of 19%. In absolute terms, that's a satisfactory return, but compared to the Commercial Services industry average of 12% it's much better.
See our latest analysis for Brambles
In the above chart we have measured Brambles' prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Brambles .
What Does the ROCE Trend For Brambles Tell Us?
Brambles is displaying some positive trends. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 19%. 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 21%. So we're very much inspired by what we're seeing at Brambles thanks to its ability to profitably reinvest capital.
What We Can Learn From Brambles' ROCE
To sum it up, Brambles 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 staggering 148% to shareholders over the last five years, it looks like investors are recognizing these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.
If you want to continue researching Brambles, you might be interested to know about the 2 warning signs that our analysis has discovered.
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.