There are a few key trends to look for if we want to identify the next multi-bagger. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, 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. Although, when we looked at Sonic Healthcare (ASX:SHL), it didn't seem to tick all of these boxes.

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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 Sonic Healthcare:

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

0.071 = AU$934m ÷ (AU$15b - AU$2.2b) (Based on the trailing twelve months to December 2024).

So, Sonic Healthcare has an ROCE of 7.1%.  On its own that's a low return, but compared to the average of 5.7% generated by the Healthcare industry, it's much better.

Check out our latest analysis for Sonic Healthcare ASX:SHL Return on Capital Employed July 30th 2025

In the above chart we have measured Sonic Healthcare's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Sonic Healthcare .

So How Is Sonic Healthcare's ROCE Trending?

We weren't thrilled with the trend because Sonic Healthcare's ROCE has reduced by 24% over the last five years, while the business employed 50% more capital. That being said, Sonic Healthcare raised some capital prior to their latest results being released, so that could partly explain the increase in capital employed. Sonic Healthcare probably hasn't received a full year of earnings yet from the new funds it raised, so these figures should be taken with a grain of salt.

Our Take On Sonic Healthcare's ROCE

Even though returns on capital have fallen in the short term, we find it promising that revenue and capital employed have both increased for Sonic Healthcare. However, total returns to shareholders over the last five years have been flat, which could indicate these growth trends potentially aren't accounted for yet by investors. As a result, we'd recommend researching this stock further to uncover what other fundamentals of the business can show us.

Story Continues

On a separate note, we've found  1 warning sign for Sonic Healthcare  you'll probably want to know about.

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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