If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing 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. With that in mind, we’ve noticed some promising trends at Travel + Leisure (NYSE:TNL) so let’s look a bit deeper.

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If you haven’t worked with ROCE before, it measures the ‘return’ (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Travel + Leisure is:

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

0.15 = US$787m ÷ (US$6.9b – US$1.6b) (Based on the trailing twelve months to September 2025).

So, Travel + Leisure has an ROCE of 15%. On its own, that’s a standard return, however it’s much better than the 11% generated by the Hospitality industry.

View our latest analysis for Travel + Leisure

Above you can see how the current ROCE for Travel + Leisure compares to its prior returns on capital, but there’s only so much you can tell from the past. If you’d like to see what analysts are forecasting going forward, you should check out our free analyst report for Travel + Leisure .

Travel + Leisure’s ROCE growth is quite impressive. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 406% over the last five years. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company’s efficiencies. It’s worth looking deeper into this though because while it’s great that the business is more efficient, it might also mean that going forward the areas to invest internally for the organic growth are lacking.

To bring it all together, Travel + Leisure has done well to increase the returns it’s generating from its capital employed. Since the stock has returned a solid 80% to shareholders over the last five years, it’s fair to say investors are beginning to recognize these changes. So given the stock has proven it has promising trends, it’s worth researching the company further to see if these trends are likely to persist.

One final note, you should learn about the 3 warning signs we’ve spotted with Travel + Leisure (including 1 which is concerning) .

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.

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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.