What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. That's why when we briefly looked at JB Hi-Fi's (ASX:JBH) ROCE trend, we were very happy with what we saw.

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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. To calculate this metric for JB Hi-Fi, this is the formula:

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

0.30 = AU$693m ÷ (AU$3.9b - AU$1.6b) (Based on the trailing twelve months to June 2025).

Thus, JB Hi-Fi has an ROCE of 30%.  In absolute terms that's a great return and it's even better than the Specialty Retail industry average of 15%.

Check out our latest analysis for JB Hi-Fi ASX:JBH Return on Capital Employed November 19th 2025

Above you can see how the current ROCE for JB Hi-Fi compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering JB Hi-Fi  for free.

What The Trend Of ROCE Can Tell Us

We'd be pretty happy with returns on capital like JB Hi-Fi. Over the past five years, ROCE has remained relatively flat at around 30% and the business has deployed 29% more capital into its operations. With returns that high, it's great that the business can continually reinvest its money at such appealing rates of return. You'll see this when looking at well operated businesses or favorable business models.

Our Take On JB Hi-Fi's ROCE

In the end, the company has proven it can reinvest it's capital at high rates of returns, which you'll remember is a trait of a multi-bagger. And the stock has done incredibly well with a 180% return over the last five years, so long term investors are no doubt ecstatic with that result. So while the positive underlying trends may be accounted for by investors, we still think this stock is worth looking into further.

On a separate note, we've found  2 warning signs for JB Hi-Fi  you'll probably want to know about.

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If you want to search for more stocks that have been earning high returns, check out this freelist of stocks with solid balance sheets that are also earning high 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.

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