Published on 8 Nov 2023 on Simply Wall St. via Yahoo Finance

Why The 23% Return On Capital At Procter & Gamble (NYSE:PG) Should Have Your Attention

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base 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. Speaking of which, we noticed some great changes in Procter & Gamble's (NYSE:PG) returns on capital, so let's have a look.

Return On Capital Employed (ROCE): What Is It?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. To calculate this metric for Procter & Gamble, this is the formula: