To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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. However, after investigating Edwards Lifesciences (NYSE:EW), we don’t think it’s current trends fit the mold of a multi-bagger.
Return On Capital Employed (ROCE): What Is It?
Just to clarify if you’re unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on Edwards Lifesciences is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets – Current Liabilities)
0.13 = US$1.6b ÷ (US$13b – US$1.4b) (Based on the trailing twelve months to June 2025).
So, Edwards Lifesciences has an ROCE of 13%. In absolute terms, that’s a satisfactory return, but compared to the Medical Equipment industry average of 10% it’s much better.
In the above chart we have measured Edwards Lifesciences’ prior ROCE against its prior performance, but the future is arguably more important. If you’re interested, you can view the analysts predictions in our free analyst report for Edwards Lifesciences .
How Are Returns Trending?
When we looked at the ROCE trend at Edwards Lifesciences, we didn’t gain much confidence. Over the last five years, returns on capital have decreased to 13% from 22% five years ago. However it looks like Edwards Lifesciences might be reinvesting for long term growth because while capital employed has increased, the company’s sales haven’t changed much in the last 12 months. It may take some time before the company starts to see any change in earnings from these investments.
The Bottom Line On Edwards Lifesciences’ ROCE
To conclude, we’ve found that Edwards Lifesciences is reinvesting in the business, but returns have been falling. Additionally, the stock’s total return to shareholders over the last five years has been flat, which isn’t too surprising. In any case, the stock doesn’t have these traits of a multi-bagger discussed above, so if that’s what you’re looking for, we think you’d have more luck elsewhere.
If you’re still interested in Edwards Lifesciences it’s worth checking out our FREE intrinsic value approximation for EW to see if it’s trading at an attractive price in other respects.
For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.