Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. 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 O-I Glass (NYSE:OI), we don't think it's current trends fit the mold of a multi-bagger.
Return On Capital Employed (ROCE): What Is It?
If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for O-I Glass:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.076 = US$519m ÷ (US$8.7b - US$1.9b) (Based on the trailing twelve months to March 2025).
Thus, O-I Glass has an ROCE of 7.6%. In absolute terms, that's a low return and it also under-performs the Packaging industry average of 9.8%.
Check out our latest analysis for O-I Glass
Above you can see how the current ROCE for O-I Glass 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 O-I Glass for free.
The Trend Of ROCE
Things have been pretty stable at O-I Glass, with its capital employed and returns on that capital staying somewhat the same for the last 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 O-I Glass doesn't end up being a multi-bagger in a few years time.
In Conclusion...
In summary, O-I Glass isn't compounding its earnings but is generating stable returns on the same amount of capital employed. Since the stock has gained an impressive 65% over the last five years, investors must think there's better things to come. But if the trajectory of these underlying trends continue, we think the likelihood of it being a multi-bagger from here isn't high.
Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 2 warning signs for O-I Glass (of which 1 makes us a bit uncomfortable!) that you should know about.
While O-I Glass may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.
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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.