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

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's 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 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 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. The formula for this calculation on Société Anonyme des Bains de Mer et du Cercle des Étrangers à Monaco is:

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

0.042 = €78m ÷ (€2.2b - €395m) (Based on the trailing twelve months to September 2024).

So, Société Anonyme des Bains de Mer et du Cercle des Étrangers à Monaco has an ROCE of 4.2%. In absolute terms, that's a low return and it also under-performs the Hospitality industry average of 8.1%.

See 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 want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Société Anonyme des Bains de Mer et du Cercle des Étrangers à Monaco.

What Does the ROCE Trend For Société Anonyme des Bains de Mer et du Cercle des Étrangers à Monaco Tell Us?

We're glad to see that ROCE is heading in the right direction, even if it is still low at the moment. Over the last five years, returns on capital employed have risen substantially to 4.2%. 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 58%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

The Bottom Line

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Société Anonyme des Bains de Mer et du Cercle des Étrangers à Monaco has. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 77% return over the last five years. Therefore, we think it would be worth your time to check if these trends are going to continue.

Before jumping to any conclusions though, we need to know what value we're getting for the current share price. That's where you can check out our FREE intrinsic value estimation for BAIN that compares the share price and estimated value.

While Société Anonyme des Bains de Mer et du Cercle des Étrangers à Monaco 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.