If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Typically, we’ll want to notice a trend of growing return on capital employed (ROCE) and alongside that, 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. However, after briefly looking over the numbers, we don’t think Champion Iron (ASX:CIA) has the makings of a multi-bagger going forward, but let’s have a look at why that may be.
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. To calculate this metric for Champion Iron, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets – Current Liabilities)
0.089 = CA$276m ÷ (CA$3.4b – CA$344m) (Based on the trailing twelve months to September 2025).
So, Champion Iron has an ROCE of 8.9%. Even though it’s in line with the industry average of 9.2%, it’s still a low return by itself.
Check out our latest analysis for Champion Iron
ASX:CIA Return on Capital Employed December 12th 2025
In the above chart we have measured Champion Iron’s 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 Champion Iron .
When we looked at the ROCE trend at Champion Iron, we didn’t gain much confidence. Over the last five years, returns on capital have decreased to 8.9% from 47% five years ago. On the other hand, the company has been employing more capital without a corresponding improvement in sales in the last year, which could suggest these investments are longer term plays. It may take some time before the company starts to see any change in earnings from these investments.
To conclude, we’ve found that Champion Iron is reinvesting in the business, but returns have been falling. Since the stock has gained an impressive 49% over the last five years, investors must think there’s better things to come. But if the trajectory of these underlying trends continue, we think the likelihood of it being a multi-bagger from here isn’t high.
On a separate note, we’ve found 3 warning signs for Champion Iron you’ll probably want to know about.
While Champion Iron may not currently earn the highest returns, we’ve compiled a list of companies that currently earn more than 25% return on equity. Check out this free list 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.