Investors Will Want Saint Jean Groupe Société anonyme's (EPA:SABE) Growth In ROCE To Persist

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, we've noticed some promising trends at Saint Jean Groupe Société anonyme (EPA:SABE) so let's look a bit deeper.

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

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. The formula for this calculation on Saint Jean Groupe Société anonyme is:

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

0.018 = €2.3m ÷ (€164m - €33m) (Based on the trailing twelve months to June 2023).

Thus, Saint Jean Groupe Société anonyme has an ROCE of 1.8%. Ultimately, that's a low return and it under-performs the Food industry average of 6.9%.

View our latest analysis for Saint Jean Groupe Société anonyme

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

What The Trend Of ROCE Can Tell Us

Saint Jean Groupe Société anonyme has recently broken into profitability so their prior investments seem to be paying off. Shareholders would no doubt be pleased with this because the business was loss-making five years ago but is is now generating 1.8% on its capital. In addition to that, Saint Jean Groupe Société anonyme is employing 49% more capital than previously which is expected of a company that's trying to break into profitability. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

Our Take On Saint Jean Groupe Société anonyme's ROCE

To the delight of most shareholders, Saint Jean Groupe Société anonyme has now broken into profitability. Astute investors may have an opportunity here because the stock has declined 10% in the last five years. So researching this company further and determining whether or not these trends will continue seems justified.

One final note, you should learn about the 3 warning signs we've spotted with Saint Jean Groupe Société anonyme (including 1 which is a bit concerning) .

While Saint Jean Groupe 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.