Return Trends At Compagnie Du Mont-Blanc (EPA:MLCMB) Aren't Appealing

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Having said that, from a first glance at Compagnie Du Mont-Blanc (EPA:MLCMB) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

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Understanding 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. Analysts use this formula to calculate it for Compagnie Du Mont-Blanc:

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

0.064 = €26m ÷ (€499m - €95m) (Based on the trailing twelve months to May 2024).

Therefore, Compagnie Du Mont-Blanc has an ROCE of 6.4%. Ultimately, that's a low return and it under-performs the Hospitality industry average of 8.5%.

See our latest analysis for Compagnie Du Mont-Blanc

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 Compagnie Du Mont-Blanc.

What Does the ROCE Trend For Compagnie Du Mont-Blanc Tell Us?

The returns on capital haven't changed much for Compagnie Du Mont-Blanc in recent years. Over the past five years, ROCE has remained relatively flat at around 6.4% and the business has deployed 54% more capital into its operations. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

The Bottom Line On Compagnie Du Mont-Blanc's ROCE

Long story short, while Compagnie Du Mont-Blanc has been reinvesting its capital, the returns that it's generating haven't increased. Investors must think there's better things to come because the stock has knocked it out of the park, delivering a 103% gain to shareholders who have held over the last five years. But if the trajectory of these underlying trends continue, we think the likelihood of it being a multi-bagger from here isn't high.

One more thing, we've spotted 2 warning signs facing Compagnie Du Mont-Blanc that you might find interesting.

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. 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.