What trends should we look for it we want to identify stocks that can multiply in value over the long term? In a perfect world, we’d like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. If you see this, it typically means it’s a company with a great business model and plenty of profitable reinvestment opportunities. With that in mind, the ROCE of Reliance Worldwide (ASX:RWC) looks decent, right now, so lets see what the trend of returns can tell us.
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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 Reliance Worldwide:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets – Current Liabilities)
0.10 = US$206m ÷ (US$2.2b – US$216m) (Based on the trailing twelve months to June 2025).
So, Reliance Worldwide has an ROCE of 10%. In absolute terms, that’s a pretty normal return, and it’s somewhat close to the Building industry average of 9.1%.
Check out our latest analysis for Reliance Worldwide
In the above chart we have measured Reliance Worldwide’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 Reliance Worldwide for free.
While the current returns on capital are decent, they haven’t changed much. The company has employed 46% more capital in the last five years, and the returns on that capital have remained stable at 10%. 10% is a pretty standard return, and it provides some comfort knowing that Reliance Worldwide has consistently earned this amount. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.
In the end, Reliance Worldwide has proven its ability to adequately reinvest capital at good rates of return. However, over the last five years, the stock has only delivered a 24% return to shareholders who held over that period. So to determine if Reliance Worldwide is a multi-bagger going forward, we’d suggest digging deeper into the company’s other fundamentals.
