Did you know there are some financial metrics that can provide clues of a potential 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. If you see this, it typically means it’s a company with a great business model and plenty of profitable reinvestment opportunities. So on that note, Freelancer (ASX:FLN) looks quite promising in regards to its trends of return on capital.
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 Freelancer:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets – Current Liabilities)
0.074 = AU$2.7m ÷ (AU$84m – AU$47m) (Based on the trailing twelve months to June 2025).
Thus, Freelancer has an ROCE of 7.4%. Ultimately, that’s a low return and it under-performs the Professional Services industry average of 16%.
Check out our latest analysis for Freelancer
In the above chart we have measured Freelancer’s prior ROCE against its prior performance, but the future is arguably more important. If you’d like, you can check out the forecasts from the analysts covering Freelancer for free.
Like most people, we’re pleased that Freelancer is now generating some pretax earnings. The company was generating losses five years ago, but now it’s turned around, earning 7.4% which is no doubt a relief for some early shareholders. Additionally, the business is utilizing 37% less capital than it was five years ago, and taken at face value, that can mean the company needs less funds at work to get a return. Freelancer could be selling under-performing assets since the ROCE is improving.
On a separate but related note, it’s important to know that Freelancer has a current liabilities to total assets ratio of 57%, which we’d consider pretty high. This effectively means that suppliers (or short-term creditors) are funding a large portion of the business, so just be aware that this can introduce some elements of risk. While it’s not necessarily a bad thing, it can be beneficial if this ratio is lower.
In a nutshell, we’re pleased to see that Freelancer has been able to generate higher returns from less capital. Given the stock has declined 52% in the last five years, this could be a good investment if the valuation and other metrics are also appealing. That being the case, research into the company’s current valuation metrics and future prospects seems fitting.
Source: The Return Trends At Freelancer (ASX:FLN) Look Promising
