If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. With that in mind, the ROCE of Thryv Holdings (NASDAQ:THRY) looks great, so lets see what the trend can tell us.

What Is Return On Capital Employed (ROCE)?

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. The formula for this calculation on Thryv Holdings is:

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

0.21 = US$185m ÷ (US$1.1b - US$238m) (Based on the trailing twelve months to June 2023).

Therefore, Thryv Holdings has an ROCE of 21%. In absolute terms that's a great return and it's even better than the Media industry average of 8.8%.

Check out our latest analysis for Thryv Holdings

In the above chart we have measured Thryv Holdings' 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 report for Thryv Holdings.

What Can We Tell From Thryv Holdings' ROCE Trend?

Thryv Holdings has not disappointed in regards to ROCE growth. We found that the returns on capital employed over the last five years have risen by 284%. That's a very favorable trend because this means that the company is earning more per dollar of capital that's being employed. Speaking of capital employed, the company is actually utilizing 35% less than it was five years ago, which can be indicative of a business that's improving its efficiency. Thryv Holdings 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 Thryv Holdings' ROCE

From what we've seen above, Thryv Holdings has managed to increase it's returns on capital all the while reducing it's capital base. Astute investors may have an opportunity here because the stock has declined 15% in the last five years. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

While Thryv Holdings looks impressive, no company is worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether THRY is currently trading for a fair price.

High returns are a key ingredient to strong performance, so check out our free list ofstocks 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.