Christian Dior (EPA:CDI) Could Become A Multi-Bagger
If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. 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. So when we looked at the ROCE trend of Christian Dior (EPA:CDI) we really liked what we saw.
Understanding Return On Capital Employed (ROCE)
For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. To calculate this metric for Christian Dior, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.21 = €21b ÷ (€132b - €32b) (Based on the trailing twelve months to December 2022).
Thus, Christian Dior has an ROCE of 21%. In absolute terms that's a very respectable return and compared to the Luxury industry average of 20% it's pretty much on par.
Check out our latest analysis for Christian Dior
Historical performance is a great place to start when researching a stock so above you can see the gauge for Christian Dior's ROCE against it's prior returns. If you're interested in investigating Christian Dior's past further, check out this free graph of past earnings, revenue and cash flow.
What Does the ROCE Trend For Christian Dior Tell Us?
The trends we've noticed at Christian Dior are quite reassuring. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 21%. 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 74%. So we're very much inspired by what we're seeing at Christian Dior thanks to its ability to profitably reinvest capital.
All in all, it's terrific to see that Christian Dior is reaping the rewards from prior investments and is growing its capital base. And a remarkable 184% total return over the last five years tells us that investors are expecting more good things to come in the future. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.
On the other side of ROCE, we have to consider valuation. That's why we have a FREE intrinsic value estimation on our platform that is definitely worth checking out.
If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.
Valuation is complex, but we're helping make it simple.
Find out whether Christian Dior is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.View the Free Analysis
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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.
Christian Dior SE, through its subsidiaries, engages in the production, distribution, and retail of fashion and leather goods, wines and spirits, perfumes and cosmetics, and watches and jewelry worldwide.
Excellent balance sheet with proven track record.