Piscines Desjoyaux (EPA:ALPDX) Is Investing Its Capital With Increasing Efficiency

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So when we looked at the ROCE trend of Piscines Desjoyaux (EPA:ALPDX) we really liked what we saw.

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 Piscines Desjoyaux, this is the formula:

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

0.30 = €35m ÷ (€159m - €41m) (Based on the trailing twelve months to August 2021).

Therefore, Piscines Desjoyaux has an ROCE of 30%. That's a fantastic return and not only that, it outpaces the average of 14% earned by companies in a similar industry.

Check out our latest analysis for Piscines Desjoyaux

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

What Does the ROCE Trend For Piscines Desjoyaux Tell Us?

Piscines Desjoyaux is displaying some positive trends. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 30%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 54%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

Our Take On Piscines Desjoyaux's ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Piscines Desjoyaux has. Since the stock has returned a solid 68% 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 Piscines Desjoyaux, you might be interested to know about the 2 warning signs that our analysis has discovered.

Piscines Desjoyaux is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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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.