To find a multi-bagger stock, what are the underlying trends we should look for in a business? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount 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. And in light of that, the trends we're seeing at Farm Price Holdings Berhad's (KLSE:FPHB) look very promising so lets take a look.

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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 Farm Price Holdings Berhad, this is the formula:

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

0.20 = RM15m ÷ (RM92m - RM15m) (Based on the trailing twelve months to June 2025).

So, Farm Price Holdings Berhad has an ROCE of 20%. That's a fantastic return and not only that, it outpaces the average of 12% earned by companies in a similar industry.

Check out our latest analysis for Farm Price Holdings Berhad

Above you can see how the current ROCE for Farm Price Holdings Berhad compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Farm Price Holdings Berhad .

The trends we've noticed at Farm Price Holdings Berhad are quite reassuring. The numbers show that in the last four years, the returns generated on capital employed have grown considerably to 20%. Basically the business is earning more per dollar of capital invested and in addition to that, 206% more capital is being employed now too. So we're very much inspired by what we're seeing at Farm Price Holdings Berhad thanks to its ability to profitably reinvest capital.

In another part of our analysis, we noticed that the company's ratio of current liabilities to total assets decreased to 16%, which broadly means the business is relying less on its suppliers or short-term creditors to fund its operations. So shareholders would be pleased that the growth in returns has mostly come from underlying business performance.

In summary, it's great to see that Farm Price Holdings Berhad can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. Astute investors may have an opportunity here because the stock has declined 23% in the last year. So researching this company further and determining whether or not these trends will continue seems justified.

On a final note, we found 2 warning signs for Farm Price Holdings Berhad (1 is a bit concerning) you should be aware of.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.

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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.