There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Although, when we looked at CCC Intelligent Solutions Holdings (NASDAQ:CCCS), it didn't seem to tick all of these boxes.

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

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for CCC Intelligent Solutions Holdings:

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

0.026 = US$78m ÷ (US$3.1b - US$147m) (Based on the trailing twelve months to September 2024).

So, CCC Intelligent Solutions Holdings has an ROCE of 2.6%. In absolute terms, that's a low return and it also under-performs the Software industry average of 9.1%.

In the above chart we have measured CCC Intelligent Solutions 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 analyst report for CCC Intelligent Solutions Holdings .

The Trend Of ROCE

There hasn't been much to report for CCC Intelligent Solutions Holdings' returns and its level of capital employed because both metrics have been steady for the past four years. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. So don't be surprised if CCC Intelligent Solutions Holdings doesn't end up being a multi-bagger in a few years time.

What We Can Learn From CCC Intelligent Solutions Holdings' ROCE

We can conclude that in regards to CCC Intelligent Solutions Holdings' returns on capital employed and the trends, there isn't much change to report on. And investors may be recognizing these trends since the stock has only returned a total of 9.5% to shareholders over the last three years. So if you're looking for a multi-bagger, the underlying trends indicate you may have better chances elsewhere.

One more thing, we've spotted 1 warning sign facing CCC Intelligent Solutions Holdings that you might find interesting.

If you want to search for solid companies with great earnings, check out this free list 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.