Société Française de Casinos Société Anonyme (EPA:SFCA) Is Doing The Right Things To Multiply Its Share Price

What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So on that note, Société Française de Casinos Société Anonyme (EPA:SFCA) looks quite promising in regards to its trends of return on capital.

Return On Capital Employed (ROCE): What Is It?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for Société Française de Casinos Société Anonyme:

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

0.11 = €1.8m ÷ (€22m - €5.1m) (Based on the trailing twelve months to April 2024).

Therefore, Société Française de Casinos Société Anonyme has an ROCE of 11%. On its own, that's a standard return, however it's much better than the 8.1% generated by the Hospitality industry.

Check out our latest analysis for Société Française de Casinos Société Anonyme

Historical performance is a great place to start when researching a stock so above you can see the gauge for Société Française de Casinos Société Anonyme'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 Française de Casinos Société Anonyme.

How Are Returns Trending?

Société Française de Casinos Société Anonyme has not disappointed in regards to ROCE growth. We found that the returns on capital employed over the last five years have risen by 248%. The company is now earning €0.1 per dollar of capital employed. In regards to capital employed, Société Française de Casinos Société Anonyme appears to been achieving more with less, since the business is using 38% less capital to run its operation. A business that's shrinking its asset base like this isn't usually typical of a soon to be multi-bagger company.

The Bottom Line On Société Française de Casinos Société Anonyme's ROCE

In the end, Société Française de Casinos Société Anonyme has proven it's capital allocation skills are good with those higher returns from less amount of capital. Considering the stock has delivered 3.8% to its stockholders over the last five years, it may be fair to think that investors aren't fully aware of the promising trends yet. Given that, we'd look further into this stock in case it has more traits that could make it multiply in the long term.

One more thing, we've spotted 1 warning sign facing Société Française de Casinos Société Anonyme that you might find interesting.

While Société Française de Casinos Société Anonyme 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.