Returns At M2i Société anonyme (EPA:ALMII) Appear To Be Weighed Down

If you're looking for a multi-bagger, there's a few things to keep an eye out 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Although, when we looked at M2i Société anonyme (EPA:ALMII), it didn't seem to tick all of these boxes.

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. The formula for this calculation on M2i Société anonyme is:

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

0.097 = €3.0m ÷ (€49m - €18m) (Based on the trailing twelve months to June 2024).

Therefore, M2i Société anonyme has an ROCE of 9.7%. Ultimately, that's a low return and it under-performs the Consumer Services industry average of 13%.

See our latest analysis for M2i Société anonyme

Above you can see how the current ROCE for M2i Société anonyme compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for M2i Société anonyme .

What Does the ROCE Trend For M2i Société anonyme Tell Us?

There hasn't been much to report for M2i Société anonyme's returns and its level of capital employed because both metrics have been steady for the past five years. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. So unless we see a substantial change at M2i Société anonyme in terms of ROCE and additional investments being made, we wouldn't hold our breath on it being a multi-bagger.

Our Take On M2i Société anonyme's ROCE

We can conclude that in regards to M2i Société anonyme's returns on capital employed and the trends, there isn't much change to report on. Since the stock has gained an impressive 60% over the last five years, investors must think there's better things to come. Ultimately, if the underlying trends persist, we wouldn't hold our breath on it being a multi-bagger going forward.

On a final note, we found 3 warning signs for M2i Société anonyme (1 shouldn't be ignored) you should be aware of.

While M2i Société anonyme 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.