To find a multi-bagger stock, what are the underlying trends we should look for in a business? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount 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 ran our eye over Bucher Industries' (VTX:BUCN) trend of ROCE, we 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. The formula for this calculation on Bucher Industries is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.15 = CHF281m ÷ (CHF2.7b - CHF795m) (Based on the trailing twelve months to June 2025).
Thus, Bucher Industries has an ROCE of 15%. That's a relatively normal return on capital, and it's around the 16% generated by the Machinery industry.
In the above chart we have measured Bucher Industries' prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Bucher Industries for free.
While the returns on capital are good, they haven't moved much. Over the past five years, ROCE has remained relatively flat at around 15% and the business has deployed 23% more capital into its operations. Since 15% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.
The main thing to remember is that Bucher Industries has proven its ability to continually reinvest at respectable rates of return. However, over the last five years, the stock has only delivered a 30% return to shareholders who held over that period. So because of the trends we're seeing, we'd recommend looking further into this stock to see if it has the makings of a multi-bagger.
While Bucher Industries doesn't shine too bright in this respect, it's still worth seeing if the company is trading at attractive prices.