There are a few key trends to look for if we want to identify the next multi-bagger. 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. So, when we ran our eye over Sonic Automotive's (NYSE:SAH) trend of ROCE, we liked what we saw.

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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. Analysts use this formula to calculate it for Sonic Automotive:

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

0.15 = US$479m ÷ (US$5.9b - US$2.6b) (Based on the trailing twelve months to March 2025).

Therefore, Sonic Automotive has an ROCE of 15%. That's a relatively normal return on capital, and it's around the 13% generated by the Specialty Retail industry.

Check out our latest analysis for Sonic Automotive

Above you can see how the current ROCE for Sonic Automotive 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 Sonic Automotive .

While the returns on capital are good, they haven't moved much. The company has employed 65% more capital in the last five years, and the returns on that capital have remained stable at 15%. 15% is a pretty standard return, and it provides some comfort knowing that Sonic Automotive has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

On a separate but related note, it's important to know that Sonic Automotive has a current liabilities to total assets ratio of 45%, which we'd consider pretty high. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. While it's not necessarily a bad thing, it can be beneficial if this ratio is lower.

In the end, Sonic Automotive has proven its ability to adequately reinvest capital at good rates of return. And long term investors would be thrilled with the 138% return they've received over the last five years. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.