Should We Be Excited About The Trends Of Returns At Société Fermière du Casino Municipal de Cannes (EPA:FCMC)?

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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. However, after briefly looking over the numbers, we don't think Société Fermière du Casino Municipal de Cannes (EPA:FCMC) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

Return On Capital Employed (ROCE): What is it?

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 Fermière du Casino Municipal de Cannes is:

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

0.066 = €23m ÷ (€394m - €41m) (Based on the trailing twelve months to October 2019).

Thus, Société Fermière du Casino Municipal de Cannes has an ROCE of 6.6%. In absolute terms, that's a low return but it's around the Hospitality industry average of 6.0%.

See our latest analysis for Société Fermière du Casino Municipal de Cannes

Historical performance is a great place to start when researching a stock so above you can see the gauge for Société Fermière du Casino Municipal de Cannes' ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Société Fermière du Casino Municipal de Cannes, check out these free graphs here.

How Are Returns Trending?

The returns on capital haven't changed much for Société Fermière du Casino Municipal de Cannes in recent years. Over the past five years, ROCE has remained relatively flat at around 6.6% and the business has deployed 23% more capital into its operations. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.

The Bottom Line

As we've seen above, Société Fermière du Casino Municipal de Cannes' returns on capital haven't increased but it is reinvesting in the business. Additionally, the stock's total return to shareholders over the last five years has been flat, which isn't too surprising. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere.

Société Fermière du Casino Municipal de Cannes does have some risks though, and we've spotted 3 warning signs for Société Fermière du Casino Municipal de Cannes that you might be interested in.

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. 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.
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