We Think Foraco International (TSE:FAR) Might Have The DNA Of A Multi-Bagger
If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we’d want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing 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 Foraco International’s (TSE:FAR) returns on capital, so let’s have a look.
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 Foraco International:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets – Current Liabilities)
0.21 = US$33m ÷ (US$236m – US$78m) (Based on the trailing twelve months to March 2025).
Thus, Foraco International has an ROCE of 21%. In absolute terms that’s a great return and it’s even better than the Metals and Mining industry average of 4.1%.
Check out our latest analysis for Foraco International
Above you can see how the current ROCE for Foraco International 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 Foraco International .
Foraco International is showing promise given that its ROCE is trending up and to the right. The figures show that over the last five years, ROCE has grown 161% whilst employing roughly the same amount of capital. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company’s efficiencies. On that front, things are looking good so it’s worth exploring what management has said about growth plans going forward.
To bring it all together, Foraco International has done well to increase the returns it’s generating from its capital employed. Since the stock has returned a staggering 420% to shareholders over the last five years, it looks like investors are recognizing these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.