If you're looking for a multi-bagger, there's a few things to keep an eye out for. Ideally, a business will show two trends; firstly a growing on capital employed (ROCE) and secondly, an increasing of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine.
So when we looked at ( ) and its trend of ROCE, we really liked what we saw. If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for iFabric, this is the formula: 0.
036 = CA$795k ÷ (CA$26m - CA$3.2m) . Therefore, Ultimately, that's a low return and it under-performs the Luxury industry average of 13%.
While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you're interested in investigating iFabric's past further, check out this . iFabric has recently broken into profitability so their prior investments seem to be paying off.
The company was generating losses five years ago, but now it's earning 3.6% which is a sight for sore eyes. And unsurprisingly, like most companies trying to break into the black, iFabric is utilizing 91% more capital than it was five years ago.
We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going fo.