There are a few key trends to look for if we want to identify the next multi-bagger. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, BJ's Wholesale Club Holdings (NYSE:BJ) looks quite promising in regards to its trends of return on capital.
What Is 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 BJ's Wholesale Club Holdings is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.18 = US$822m ÷ (US$7.2b - US$2.5b) (Based on the trailing twelve months to May 2025).
Therefore, BJ's Wholesale Club Holdings has an ROCE of 18%. In absolute terms, that's a satisfactory return, but compared to the Consumer Retailing industry average of 11% it's much better.
See our latest analysis for BJ's Wholesale Club Holdings
In the above chart we have measured BJ's Wholesale Club Holdings' 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 BJ's Wholesale Club Holdings .
How Are Returns Trending?
We like the trends that we're seeing from BJ's Wholesale Club Holdings. The data shows that returns on capital have increased substantially over the last five years to 18%. The amount of capital employed has increased too, by 29%. So we're very much inspired by what we're seeing at BJ's Wholesale Club Holdings thanks to its ability to profitably reinvest capital.
Our Take On BJ's Wholesale Club Holdings' ROCE
All in all, it's terrific to see that BJ's Wholesale Club Holdings is reaping the rewards from prior investments and is growing its capital base. And a remarkable 191% total return over the last five years tells us that investors are expecting more good things to come in the future. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.
One more thing to note, we've identified 1 warning sign with BJ's Wholesale Club Holdings and understanding this should be part of your investment process.
While BJ's Wholesale Club Holdings 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.