If you’re looking for a multi-bagger, there’s a few things to 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. Ultimately, this demonstrates that it’s a business that is reinvesting profits at increasing rates of return. And in light of that, the trends we’re seeing at Motorola Solutions’ (NYSE:MSI) look very promising so lets take a look.

Just to clarify if you’re unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for Motorola Solutions, this is the formula:

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

0.31 = US$2.8b ÷ (US$14b – US$4.7b) (Based on the trailing twelve months to September 2024).

So, Motorola Solutions has an ROCE of 31%. That’s a fantastic return and not only that, it outpaces the average of 9.7% earned by companies in a similar industry.

See our latest analysis for Motorola Solutions

Above you can see how the current ROCE for Motorola Solutions compares to its prior returns on capital, but there’s only so much you can tell from the past. If you’d like to see what analysts are forecasting going forward, you should check out our free analyst report for Motorola Solutions .

The trends we’ve noticed at Motorola Solutions are quite reassuring. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 31%. Basically the business is earning more per dollar of capital invested and in addition to that, 37% more capital is being employed now too. This can indicate that there’s plenty of opportunities to invest capital internally and at ever higher rates, a combination that’s common among multi-baggers.

All in all, it’s terrific to see that Motorola Solutions is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 204% to shareholders over the last five years, it looks like investors are recognizing these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

One more thing, we’ve spotted 3 warning signs facing Motorola Solutions that you might find interesting.