Saint Jean Groupe Société anonyme (EPA:SABE) Might Have The Makings Of A Multi-Bagger

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher 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. To calculate this metric for Saint Jean Groupe Société anonyme, this is the formula:

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

0.0046 = €601k ÷ (€164m - €33m) (Based on the trailing twelve months to December 2022).

Thus, Saint Jean Groupe Société anonyme has an ROCE of 0.5%. In absolute terms, that's a low return and it also under-performs the Food industry average of 5.6%.

Check out 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'd like to look at how Saint Jean Groupe Société anonyme has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

What Can We Tell From Saint Jean Groupe Société anonyme's ROCE Trend?

We're delighted to see that Saint Jean Groupe Société anonyme is reaping rewards from its investments and is now generating some pre-tax profits. The company was generating losses five years ago, but now it's earning 0.5% which is a sight for sore eyes. Not only that, but the company is utilizing 49% more capital than before, but that's to be expected from a company trying to break into profitability. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.

Our Take On Saint Jean Groupe Société anonyme's ROCE

Overall, Saint Jean Groupe Société anonyme gets a big tick from us thanks in most part to the fact that it is now profitable and is reinvesting in its business. And since the stock has fallen 20% over the last five years, there might be an opportunity here. So researching this company further and determining whether or not these trends will continue seems justified.

Saint Jean Groupe Société anonyme does have some risks, we noticed 3 warning signs (and 1 which is potentially serious) we think you should know about.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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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.