Bernard Loiseau (EPA:ALDBL) Is Looking To Continue Growing Its Returns On Capital

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So when we looked at Bernard Loiseau (EPA:ALDBL) and its trend of ROCE, we really liked what we saw.

What Is 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. Analysts use this formula to calculate it for Bernard Loiseau:

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

0.029 = €285k ÷ (€13m - €3.3m) (Based on the trailing twelve months to June 2024).

Thus, Bernard Loiseau has an ROCE of 2.9%. In absolute terms, that's a low return and it also under-performs the Hospitality industry average of 8.3%.

Check out our latest analysis for Bernard Loiseau

Historical performance is a great place to start when researching a stock so above you can see the gauge for Bernard Loiseau's ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Bernard Loiseau.

So How Is Bernard Loiseau's ROCE Trending?

Like most people, we're pleased that Bernard Loiseau is now generating some pretax earnings. Historically the company was generating losses but as we can see from the latest figures referenced above, they're now earning 2.9% on their capital employed. In regards to capital employed, Bernard Loiseau is using 30% less capital than it was five years ago, which on the surface, can indicate that the business has become more efficient at generating these returns. Bernard Loiseau could be selling under-performing assets since the ROCE is improving.

The Bottom Line On Bernard Loiseau's ROCE

From what we've seen above, Bernard Loiseau has managed to increase it's returns on capital all the while reducing it's capital base. Since the total return from the stock has been almost flat over the last five years, there might be an opportunity here if the valuation looks good. So researching this company further and determining whether or not these trends will continue seems justified.

Bernard Loiseau does come with some risks though, we found 4 warning signs in our investment analysis, and 2 of those are a bit unpleasant...

While Bernard Loiseau may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.