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. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, 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. Speaking of which, we noticed some great changes in (ASX:S66) returns on capital, so let's have a look.

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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 Star Combo Pharma:

0.022 = AU$853k ÷ (AU$43m - AU$5.2m) (Based on the trailing twelve months to December 2024).

So, Ultimately, that's a low return and it under-performs the Personal Products industry average of 10%.

See our latest analysis for Star Combo Pharma

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 want to delve into the historical earnings , check out these graphs detailing revenue and cash flow performance of Star Combo Pharma.

Star Combo Pharma has recently broken into profitability so their prior investments seem to be paying off. About five years ago the company was generating losses but things have turned around because it's now earning 2.2% on its capital. Not only that, but the company is utilizing 55% more capital than before, but that's to be expected from a company trying to break into profitability. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.

In summary, it's great to see that Star Combo Pharma has managed to break into profitability and is continuing to reinvest in its business. Given the stock has declined 69% in the last five years, this could be a good investment if the valuation and other metrics are also appealing. So researching this company further and determining whether or not these trends will continue seems justified.

One more thing: We've identified with Star Combo Pharma (at least 1 which is a bit unpleasant) , and understanding them would certainly be useful.

While Star Combo Pharma may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this list here.