Returns On Capital At Bijou Brigitte modische Accessoires (ETR:BIJ) Have Hit The Brakes

What trends should we look for it we want to identify stocks that can multiply in value over the long term? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing 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. So, when we ran our eye over Bijou Brigitte modische Accessoires' (ETR:BIJ) trend of ROCE, we liked what we saw.

Return On Capital Employed (ROCE): What Is It?

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 Bijou Brigitte modische Accessoires:

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

0.16 = €49m ÷ (€364m - €65m) (Based on the trailing twelve months to June 2023).

Thus, Bijou Brigitte modische Accessoires has an ROCE of 16%. That's a relatively normal return on capital, and it's around the 14% generated by the Luxury industry.

View our latest analysis for Bijou Brigitte modische Accessoires

Historical performance is a great place to start when researching a stock so above you can see the gauge for Bijou Brigitte modische Accessoires' ROCE against it's prior returns. If you'd like to look at how Bijou Brigitte modische Accessoires has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

How Are Returns Trending?

While the returns on capital are good, they haven't moved much. The company has employed 33% more capital in the last five years, and the returns on that capital have remained stable at 16%. Since 16% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

The Key Takeaway

In the end, Bijou Brigitte modische Accessoires has proven its ability to adequately reinvest capital at good rates of return. However, over the last five years, the stock has only delivered a 16% return to shareholders who held over that period. That's why it could be worth your time looking into this stock further to discover if it has more traits of a multi-bagger.

One more thing, we've spotted 3 warning signs facing Bijou Brigitte modische Accessoires that you might find interesting.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.