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

There are a few key trends to look for if we want to identify the next multi-bagger. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount 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. 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.

Understanding 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. 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)

0.039 = €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 7.3%.

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 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 delighted to see that Société Anonyme des Bains de Mer et du Cercle des Étrangers à Monaco is reaping rewards from its investments and is now generating some pre-tax profits. About five years ago the company was generating losses but things have turned around because it's now earning 3.9% on its capital. Not only that, but the company is utilizing 67% more capital than before, but that's to be expected from a company trying to break into profitability. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, both common traits of a multi-bagger.

In Conclusion...

In summary, it's great to see that Société Anonyme des Bains de Mer et du Cercle des Étrangers à Monaco has managed to break into profitability and is continuing to reinvest in its business. Since the stock has returned a staggering 131% to shareholders over the last five years, it looks like investors are recognizing these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

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.

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.