We Like These Underlying Return On Capital Trends At Compagnie Générale des Établissements Michelin Société en commandite par actions (EPA:ML)

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing 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. With that in mind, we've noticed some promising trends at Compagnie Générale des Établissements Michelin Société en commandite par actions (EPA:ML) so let's look a bit deeper.

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Understanding Return On Capital Employed (ROCE)

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the 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)

0.10 = €2.8b ÷ (€36b - €8.2b) (Based on the trailing twelve months to June 2025).

Thus, Compagnie Générale des Établissements Michelin Société en commandite par actions has an ROCE of 10%. That's a pretty standard return and it's in line with the industry average of 9.7%.

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

In the above chart we have measured Compagnie Générale des Établissements Michelin Société en commandite par actions' prior ROCE against its prior performance, but the future is arguably more important. 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 .

What Does the ROCE Trend For Compagnie Générale des Établissements Michelin Société en commandite par actions Tell Us?

Compagnie Générale des Établissements Michelin Société en commandite par actions' ROCE growth is quite impressive. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 29% in that same time. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

The Key Takeaway

In summary, we're delighted to see that Compagnie Générale des Établissements Michelin Société en commandite par actions has been able to increase efficiencies and earn higher rates of return on the same amount of capital. Since the stock has returned a solid 60% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

If you want to continue researching Compagnie Générale des Établissements Michelin Société en commandite par actions, you might be interested to know about the 2 warning signs that our analysis has discovered.

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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.