If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount 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. So on that note, OraSure Technologies (NASDAQ:OSUR) looks quite promising in regards to its trends of return on capital.

Return On Capital Employed (ROCE): What Is It?

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 OraSure Technologies is:

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

0.12 = US$54m ÷ (US$483m - US$40m) (Based on the trailing twelve months to December 2023).

So, OraSure Technologies has an ROCE of 12%. On its own, that's a standard return, however it's much better than the 9.4% generated by the Medical Equipment industry.

View our latest analysis for OraSure Technologies

In the above chart we have measured OraSure Technologies' 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 OraSure Technologies .

So How Is OraSure Technologies' ROCE Trending?

OraSure Technologies is displaying some positive trends. Over the last five years, returns on capital employed have risen substantially to 12%. The amount of capital employed has increased too, by 54%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

Our Take On OraSure Technologies' ROCE

To sum it up, OraSure Technologies has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And since the stock has fallen 43% over the last five years, there might be an opportunity here. With that in mind, we believe the promising trends warrant this stock for further investigation.

On a final note, we found 2 warning signs for OraSure Technologies (1 is concerning) you should be aware of.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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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.