Beiersdorf (ETR:BEI) Has Some Way To Go To Become A Multi-Bagger

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. With that in mind, the ROCE of Beiersdorf (ETR:BEI) looks decent, right now, so lets see what the trend of returns can tell us.

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

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Beiersdorf:

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

0.15 = €1.4b ÷ (€13b - €3.7b) (Based on the trailing twelve months to December 2024).

So, Beiersdorf has an ROCE of 15%. On its own, that's a standard return, however it's much better than the 12% generated by the Personal Products industry.

Check out our latest analysis for Beiersdorf

Above you can see how the current ROCE for Beiersdorf 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 Beiersdorf for free.

So How Is Beiersdorf's ROCE Trending?

The trend of ROCE doesn't stand out much, but returns on a whole are decent. The company has employed 29% 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 Beiersdorf 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.

In Conclusion...

To sum it up, Beiersdorf has simply been reinvesting capital steadily, at those decent rates of return. And given the stock has only risen 33% over the last five years, we'd suspect the market is beginning to recognize these trends. 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.

If you're still interested in Beiersdorf it's worth checking out our FREE intrinsic value approximation for BEI to see if it's trading at an attractive price in other respects.

While Beiersdorf may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.