Société Anonyme des Bains de Mer et du Cercle des Étrangers à Monaco (EPA:BAIN) Is Doing The Right Things To Multiply Its Share Price

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Speaking of which, we noticed some great changes in Société Anonyme des Bains de Mer et du Cercle des Étrangers à Monaco's (EPA:BAIN) returns on capital, so let's have a look.

What is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Société Anonyme des Bains de Mer et du Cercle des Étrangers à Monaco:

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

0.038 = €35m ÷ (€1.3b - €360m) (Based on the trailing twelve months to March 2022).

Thus, Société Anonyme des Bains de Mer et du Cercle des Étrangers à Monaco has an ROCE of 3.8%. Even though it's in line with the industry average of 3.8%, it's still a low return by itself.

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

Historical performance is a great place to start when researching a stock so above you can see the gauge for Société Anonyme des Bains de Mer et du Cercle des Étrangers à Monaco's ROCE against it's prior returns. If you're interested in investigating Société Anonyme des Bains de Mer et du Cercle des Étrangers à Monaco's past further, check out this free graph of past earnings, revenue and cash flow.

How Are Returns Trending?

Shareholders will be relieved that Société Anonyme des Bains de Mer et du Cercle des Étrangers à Monaco has broken into profitability. The company was generating losses five years ago, but has managed to turn it around and as we saw earlier is now earning 3.8%, which is always encouraging. Interestingly, the capital employed by the business has remained relatively flat, so these higher returns are either from prior investments paying off or increased efficiencies. With no noticeable increase in capital employed, it's worth knowing what the company plans on doing going forward in regards to reinvesting and growing the business. After all, a company can only become a long term multi-bagger if it continually reinvests in itself at high rates of return.

The Bottom Line On Société Anonyme des Bains de Mer et du Cercle des Étrangers à Monaco's ROCE

As discussed above, Société Anonyme des Bains de Mer et du Cercle des Étrangers à Monaco appears to be getting more proficient at generating returns since capital employed has remained flat but earnings (before interest and tax) are up. And a remarkable 161% total return over the last five years tells us that investors are expecting more good things to come in the future. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

One more thing, we've spotted 1 warning sign facing Société Anonyme des Bains de Mer et du Cercle des Étrangers à Monaco that you might find interesting.

While Société Anonyme des Bains de Mer et du Cercle des Étrangers à Monaco isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.