To find a multi-bagger stock, what are the underlying trends we should look for in a business? In a perfect world, we’d like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Ultimately, this demonstrates that it’s a business that is reinvesting profits at increasing rates of return. So when we looked at the ROCE trend of WashTec (ETR:WSU) we really liked what we saw.

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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. Analysts use this formula to calculate it for WashTec:

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

0.49 = €45m ÷ (€281m – €188m) (Based on the trailing twelve months to June 2025).

Therefore, WashTec has an ROCE of 49%. In absolute terms that’s a great return and it’s even better than the Machinery industry average of 9.0%.

Check out our latest analysis for WashTec

In the above chart we have measured WashTec’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 free analyst report for WashTec .

We’re pretty happy with how the ROCE has been trending at WashTec. The data shows that returns on capital have increased by 74% over the trailing five years. That’s not bad because this tells for every dollar invested (capital employed), the company is increasing the amount earned from that dollar. In regards to capital employed, WashTec appears to been achieving more with less, since the business is using 23% less capital to run its operation. A business that’s shrinking its asset base like this isn’t usually typical of a soon to be multi-bagger company.

On a side note, we noticed that the improvement in ROCE appears to be partly fueled by an increase in current liabilities. The current liabilities has increased to 67% of total assets, so the business is now more funded by the likes of its suppliers or short-term creditors. And with current liabilities at those levels, that’s pretty high.

In a nutshell, we’re pleased to see that WashTec has been able to generate higher returns from less capital. Considering the stock has delivered 23% to its stockholders over the last five years, it may be fair to think that investors aren’t fully aware of the promising trends yet. So exploring more about this stock could uncover a good opportunity, if the valuation and other metrics stack up.