Returns At Société Anonyme des Bains de Mer et du Cercle des Étrangers à Monaco (EPA:BAIN) Are On The Way Up

What are the early trends we should look for to identify a stock that could multiply in value over the long term? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So on that note, Société Anonyme des Bains de Mer et du Cercle des Étrangers à Monaco (EPA:BAIN) looks quite promising in regards to its trends of return on capital.

What Is 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 Société Anonyme des Bains de Mer et du Cercle des Étrangers à Monaco, this is the formula:

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

0.039 = €69m ÷ (€2.1b - €379m) (Based on the trailing twelve months to September 2023).

So, Société Anonyme des Bains de Mer et du Cercle des Étrangers à Monaco has an ROCE of 3.9%. In absolute terms, that's a low return and it also under-performs the Hospitality industry average of 7.5%.

View our latest analysis for Société Anonyme des Bains de Mer et du Cercle des Étrangers à Monaco

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how Société Anonyme des Bains de Mer et du Cercle des Étrangers à Monaco has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

The Trend Of ROCE

The fact that Société Anonyme des Bains de Mer et du Cercle des Étrangers à Monaco is now generating some pre-tax profits from its prior investments is very encouraging. About five years ago the company was generating losses but things have turned around because it's now earning 3.9% on its capital. And unsurprisingly, like most companies trying to break into the black, Société Anonyme des Bains de Mer et du Cercle des Étrangers à Monaco is utilizing 67% more capital than it was five years ago. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.

The Bottom Line

To the delight of most shareholders, Société Anonyme des Bains de Mer et du Cercle des Étrangers à Monaco has now broken into profitability. Since the stock has returned a staggering 128% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if Société Anonyme des Bains de Mer et du Cercle des Étrangers à Monaco can keep these trends up, it could have a bright future ahead.

On a separate note, we've found 1 warning sign for Société Anonyme des Bains de Mer et du Cercle des Étrangers à Monaco you'll probably want to know about.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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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.