Many Would Be Envious Of La Française des Jeux Société anonyme's (EPA:FDJ) Excellent Returns On Capital

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing 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. That's why when we briefly looked at La Française des Jeux Société anonyme's (EPA:FDJ) ROCE trend, we were very happy with what we saw.

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 La Française des Jeux Société anonyme is:

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

0.33 = €524m ÷ (€3.8b - €2.1b) (Based on the trailing twelve months to December 2023).

So, La Française des Jeux Société anonyme has an ROCE of 33%. In absolute terms that's a great return and it's even better than the Hospitality industry average of 7.3%.

See our latest analysis for La Française des Jeux Société anonyme

In the above chart we have measured La Française des Jeux Société anonyme's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for La Française des Jeux Société anonyme .

So How Is La Française des Jeux Société anonyme's ROCE Trending?

La Française des Jeux Société anonyme deserves to be commended in regards to it's returns. Over the past five years, ROCE has remained relatively flat at around 33% and the business has deployed 85% more capital into its operations. With returns that high, it's great that the business can continually reinvest its money at such appealing rates of return. If La Française des Jeux Société anonyme can keep this up, we'd be very optimistic about its future.

On a side note, La Française des Jeux Société anonyme's current liabilities are still rather high at 57% of total assets. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. While it's not necessarily a bad thing, it can be beneficial if this ratio is lower.

The Key Takeaway

In summary, we're delighted to see that La Française des Jeux Société anonyme has been compounding returns by reinvesting at consistently high rates of return, as these are common traits of a multi-bagger. Despite the good fundamentals, total returns from the stock have been virtually flat over the last three years. That's why we think it'd be worthwhile to look further into this stock given the fundamentals are appealing.

If you want to continue researching La Française des Jeux Société anonyme, you might be interested to know about the 1 warning sign that our analysis has discovered.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning 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.