Did you know there are some financial metrics that can provide clues of a potential 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Although, when we looked at Saputo (TSE:SAP), it didn't seem to tick all of these boxes.

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What Is Return On Capital Employed (ROCE)?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for Saputo, this is the formula:

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

0.089 = CA$948m ÷ (CA$14b - CA$3.2b) (Based on the trailing twelve months to December 2024).

So, Saputo has an ROCE of 8.9%.  On its own, that's a low figure but it's around the 10% average generated by the Food industry.

See our latest analysis for Saputo TSX:SAP Return on Capital Employed April 14th 2025

In the above chart we have measured Saputo's 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 freeanalyst report for Saputo .

The Trend Of ROCE

Over the past five years, Saputo's ROCE and capital employed have both remained mostly flat. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. With that in mind, unless investment picks up again in the future, we wouldn't expect Saputo to be a multi-bagger going forward. With fewer investment opportunities, it makes sense that Saputo has been paying out a decent 40% of its earnings to shareholders. Given the business isn't reinvesting in itself, it makes sense to distribute a portion of earnings among shareholders.

The Bottom Line On Saputo's ROCE

We can conclude that in regards to Saputo's returns on capital employed and the trends, there isn't much change to report on. And in the last five years, the stock has given away 20% so the market doesn't look too hopeful on these trends strengthening any time soon. On the whole, we aren't too inspired by the underlying trends and we think there may be better chances of finding a multi-bagger elsewhere.

On a final note, we've found  2 warning signs for Saputo that we think you should be aware of.

Story Continues

While Saputo isn't earning the highest return, check out this freelist 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.

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