# Is There More To Roche Bobois S.A. (EPA:RBO) Than Its 15% Returns On Capital?

Today we are going to look at Roche Bobois S.A. (EPA:RBO) to see whether it might be an attractive investment prospect. Specifically, we’re going to calculate its Return On Capital Employed (ROCE), in the hopes of getting some insight into the business.

Firstly, we’ll go over how we calculate ROCE. Next, we’ll compare it to others in its industry. Last but not least, we’ll look at what impact its current liabilities have on its ROCE.

### Understanding Return On Capital Employed (ROCE)

ROCE is a measure of a company’s yearly pre-tax profit (its return), relative to the capital employed in the business. In general, businesses with a higher ROCE are usually better quality. Ultimately, it is a useful but imperfect metric. Author Edwin Whiting says to be careful when comparing the ROCE of different businesses, since ‘No two businesses are exactly alike.’

### How Do You Calculate Return On Capital Employed?

The formula for calculating the return on capital employed is:

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

Or for Roche Bobois:

0.15 = €12m ÷ (€170m – €93m) (Based on the trailing twelve months to December 2018.)

So, Roche Bobois has an ROCE of 15%.

### Is Roche Bobois’s ROCE Good?

ROCE is commonly used for comparing the performance of similar businesses. We can see Roche Bobois’s ROCE is around the 14% average reported by the Consumer Durables industry. Independently of how Roche Bobois compares to its industry, its ROCE in absolute terms appears decent, and the company may be worthy of closer investigation.

It is important to remember that ROCE shows past performance, and is not necessarily predictive. Companies in cyclical industries can be difficult to understand using ROCE, as returns typically look high during boom times, and low during busts. ROCE is only a point-in-time measure. What happens in the future is pretty important for investors, so we have prepared a free report on analyst forecasts for Roche Bobois.

### Roche Bobois’s Current Liabilities And Their Impact On Its ROCE

Liabilities, such as supplier bills and bank overdrafts, are referred to as current liabilities if they need to be paid within 12 months. The ROCE equation subtracts current liabilities from capital employed, so a company with a lot of current liabilities appears to have less capital employed, and a higher ROCE than otherwise. To counter this, investors can check if a company has high current liabilities relative to total assets.

Roche Bobois has total liabilities of €93m and total assets of €170m. As a result, its current liabilities are equal to approximately 55% of its total assets. This is admittedly a high level of current liabilities, improving ROCE substantially.

### Our Take On Roche Bobois’s ROCE

This ROCE is pretty good, but remember that it would look less impressive with fewer current liabilities. There might be better investments than Roche Bobois out there, but you will have to work hard to find them . These promising businesses with rapidly growing earnings might be right up your alley.

I will like Roche Bobois better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.