Will Gérard Perrier Industrie (EPA:PERR) Multiply In Value Going Forward?

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, the ROCE of Gérard Perrier Industrie (EPA:PERR) looks decent, right now, so lets see what the trend of returns can tell us.

Understanding Return On Capital Employed (ROCE)

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on Gérard Perrier Industrie is:

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

0.17 = €17m ÷ (€157m - €58m) (Based on the trailing twelve months to June 2020).

Therefore, Gérard Perrier Industrie has an ROCE of 17%. In absolute terms, that's a satisfactory return, but compared to the Electrical industry average of 10% it's much better.

View our latest analysis for Gérard Perrier Industrie

In the above chart we have measured Gérard Perrier Industrie'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 Gérard Perrier Industrie here for free.

What Can We Tell From Gérard Perrier Industrie's ROCE Trend?

While the returns on capital are good, they haven't moved much. The company has employed 40% more capital in the last five years, and the returns on that capital have remained stable at 17%. 17% is a pretty standard return, and it provides some comfort knowing that Gérard Perrier Industrie has consistently earned this amount. 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.

In Conclusion...

The main thing to remember is that Gérard Perrier Industrie has proven its ability to continually reinvest at respectable rates of return. And the stock has done incredibly well with a 143% return over the last five years, so long term investors are no doubt ecstatic with that result. So even though the stock might be more "expensive" than it was before, we think the strong fundamentals warrant this stock for further research.

Gérard Perrier Industrie does have some risks though, and we've spotted 1 warning sign for Gérard Perrier Industrie that you might be interested in.

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This article by Simply Wall St is general in nature. 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.
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