Return Trends At Compagnie Générale des Établissements Michelin Société en commandite par actions (EPA:ML) Aren't Appealing

What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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. However, after briefly looking over the numbers, we don't think Compagnie Générale des Établissements Michelin Société en commandite par actions (EPA:ML) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

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What Is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Compagnie Générale des Établissements Michelin Société en commandite par actions, this is the formula:

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

0.11 = €3.1b ÷ (€37b - €8.7b) (Based on the trailing twelve months to December 2024).

Therefore, Compagnie Générale des Établissements Michelin Société en commandite par actions has an ROCE of 11%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Auto Components industry average of 9.4%.

Check out our latest analysis for Compagnie Générale des Établissements Michelin Société en commandite par actions

Above you can see how the current ROCE for Compagnie Générale des Établissements Michelin Société en commandite par actions 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 Compagnie Générale des Établissements Michelin Société en commandite par actions .

So How Is Compagnie Générale des Établissements Michelin Société en commandite par actions' ROCE Trending?

Over the past five years, Compagnie Générale des Établissements Michelin Société en commandite par actions' ROCE and capital employed have both remained mostly flat. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. So don't be surprised if Compagnie Générale des Établissements Michelin Société en commandite par actions doesn't end up being a multi-bagger in a few years time. This probably explains why Compagnie Générale des Établissements Michelin Société en commandite par actions is paying out 47% of its income to shareholders in the form of dividends. Unless businesses have highly compelling growth opportunities, they'll typically return some money to shareholders.

The Key Takeaway

We can conclude that in regards to Compagnie Générale des Établissements Michelin Société en commandite par actions' returns on capital employed and the trends, there isn't much change to report on. Since the stock has gained an impressive 64% over the last five years, investors must think there's better things to come. But if the trajectory of these underlying trends continue, we think the likelihood of it being a multi-bagger from here isn't high.

Compagnie Générale des Établissements Michelin Société en commandite par actions does have some risks though, and we've spotted 1 warning sign for Compagnie Générale des Établissements Michelin Société en commandite par actions that you might be interested in.

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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.