Slowing Rates Of Return At Malteries Franco-Belges Société Anonyme (EPA:MALT) Leave Little Room For Excitement

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Although, when we looked at Malteries Franco-Belges Société Anonyme (EPA:MALT), it didn't seem to tick all of these boxes.

What Is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Malteries Franco-Belges Société Anonyme:

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

0.039 = €9.2m ÷ (€256m - €17m) (Based on the trailing twelve months to December 2021).

So, Malteries Franco-Belges Société Anonyme has an ROCE of 3.9%. Ultimately, that's a low return and it under-performs the Food industry average of 5.9%.

Check out our latest analysis for Malteries Franco-Belges Société Anonyme

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

So How Is Malteries Franco-Belges Société Anonyme's ROCE Trending?

The returns on capital haven't changed much for Malteries Franco-Belges Société Anonyme in recent years. The company has employed 40% more capital in the last five years, and the returns on that capital have remained stable at 3.9%. 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.

In Conclusion...

In conclusion, Malteries Franco-Belges Société Anonyme has been investing more capital into the business, but returns on that capital haven't increased. Unsurprisingly, the stock has only gained 17% over the last five years, which potentially indicates that investors are accounting for this going forward. So if you're looking for a multi-bagger, the underlying trends indicate you may have better chances elsewhere.

One more thing: We've identified 2 warning signs with Malteries Franco-Belges Société Anonyme (at least 1 which is concerning) , and understanding them would certainly be useful.

While Malteries Franco-Belges 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.