Returns Are Gaining Momentum At Pierre et Vacances (EPA:VAC)

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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 when we looked at Pierre et Vacances (EPA:VAC) and its trend of ROCE, we really liked what we saw.

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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 Pierre et Vacances:

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

0.086 = €226m ÷ (€3.9b - €1.3b) (Based on the trailing twelve months to March 2025).

Thus, Pierre et Vacances has an ROCE of 8.6%. Even though it's in line with the industry average of 8.5%, it's still a low return by itself.

See our latest analysis for Pierre et Vacances

Above you can see how the current ROCE for Pierre et Vacances compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Pierre et Vacances for free.

The Trend Of ROCE

Pierre et Vacances' ROCE growth is quite impressive. The figures show that over the last five years, ROCE has grown 245% whilst employing roughly the same amount of capital. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

What We Can Learn From Pierre et Vacances' ROCE

In summary, we're delighted to see that Pierre et Vacances has been able to increase efficiencies and earn higher rates of return on the same amount of capital. Astute investors may have an opportunity here because the stock has declined 47% in the last five years. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

Pierre et Vacances does come with some risks though, we found 3 warning signs in our investment analysis, and 2 of those don't sit too well with us...

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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.