There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Speaking of which, we noticed some great changes in Adient's (NYSE:ADNT) returns on capital, so let's have a look.

Understanding Return On Capital Employed (ROCE)

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 Adient:

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

0.074 = US$392m ÷ (US$8.5b - US$3.3b) (Based on the trailing twelve months to December 2024).

So, Adient has an ROCE of 7.4%.  Ultimately, that's a low return and it under-performs the Auto Components industry average of 11%.

See our latest analysis for Adient NYSE:ADNT Return on Capital Employed March 11th 2025

In the above chart we have measured Adient's 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 Adient  for free.

What The Trend Of ROCE Can Tell Us

Adient has not disappointed in regards to ROCE growth. The data shows that returns on capital have increased by 174% over the trailing five years. That's a very favorable trend because this means that the company is earning more per dollar of capital that's being employed. Interestingly, the business may be becoming more efficient because it's applying 21% less capital than it was five years ago. Adient may be selling some assets so it's worth investigating if the business has plans for future investments to increase returns further still.

Our Take On Adient's ROCE

In summary, it's great to see that Adient has been able to turn things around and earn higher returns on lower amounts of capital. And with a respectable 54% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

While Adient looks impressive, no company is worth an infinite price. The  intrinsic value infographic for ADNT helps visualize whether it is currently trading for a fair price.

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If you want to search for solid companies with great earnings, check out this freelist of companies with good balance sheets and impressive 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.

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