Rémy Cointreau (EPA:RCO) Has Some Way To Go To Become A Multi-Bagger

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So, when we ran our eye over Rémy Cointreau's (EPA:RCO) trend of ROCE, we liked what we saw.

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

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for Rémy Cointreau, this is the formula:

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

0.11 = €282m ÷ (€3.4b - €888m) (Based on the trailing twelve months to September 2024).

So, Rémy Cointreau has an ROCE of 11%. In absolute terms, that's a satisfactory return, but compared to the Beverage industry average of 7.7% it's much better.

See our latest analysis for Rémy Cointreau

In the above chart we have measured Rémy Cointreau's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Rémy Cointreau for free.

What Does the ROCE Trend For Rémy Cointreau Tell Us?

The trend of ROCE doesn't stand out much, but returns on a whole are decent. Over the past five years, ROCE has remained relatively flat at around 11% and the business has deployed 25% more capital into its operations. 11% is a pretty standard return, and it provides some comfort knowing that Rémy Cointreau has consistently earned this amount. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

In Conclusion...

In the end, Rémy Cointreau has proven its ability to adequately reinvest capital at good rates of return. Yet over the last five years the stock has declined 42%, so the decline might provide an opening. For that reason, savvy investors might want to look further into this company in case it's a prime investment.

If you'd like to know about the risks facing Rémy Cointreau, we've discovered 1 warning sign that you should be aware of.

While Rémy Cointreau 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.