There are a few key trends to look for if we want to identify the next multi-bagger. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. That's why when we briefly looked at Elevance Health's (NYSE:ELV) ROCE trend, we were pretty happy with what we saw.

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Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Elevance Health, this is the formula:

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

0.12 = US$9.1b ÷ (US$120b - US$43b) (Based on the trailing twelve months to March 2025).

Therefore, Elevance Health has an ROCE of 12%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Healthcare industry average of 10%.

See our latest analysis for Elevance Health

In the above chart we have measured Elevance Health'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 Elevance Health .

How Are Returns Trending?

While the returns on capital are good, they haven't moved much. The company has employed 39% more capital in the last five years, and the returns on that capital have remained stable at 12%. Since 12% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

The Bottom Line On Elevance Health's ROCE

To sum it up, Elevance Health has simply been reinvesting capital steadily, at those decent rates of return. And the stock has followed suit returning a meaningful 60% to shareholders over the last five years. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

Like most companies, Elevance Health does come with some risks, and we've found 1 warning sign that you should be aware of.

While Elevance Health isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.