Saint Jean Groupe Société anonyme (EPA:SABE) Will Want To Turn Around Its Return Trends

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount 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. However, after briefly looking over the numbers, we don't think Saint Jean Groupe Société anonyme (EPA:SABE) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

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)

0.021 = €2.7m ÷ (€154m - €30m) (Based on the trailing twelve months to June 2022).

So, Saint Jean Groupe Société anonyme has an ROCE of 2.1%. Ultimately, that's a low return and it under-performs the Food industry average of 5.9%.

See 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.

So How Is Saint Jean Groupe Société anonyme's ROCE Trending?

In terms of Saint Jean Groupe Société anonyme's historical ROCE movements, the trend isn't fantastic. To be more specific, ROCE has fallen from 5.0% over the last five years. However it looks like Saint Jean Groupe Société anonyme might be reinvesting for long term growth because while capital employed has increased, the company's sales haven't changed much in the last 12 months. It's worth keeping an eye on the company's earnings from here on to see if these investments do end up contributing to the bottom line.

Our Take On Saint Jean Groupe Société anonyme's ROCE

In summary, Saint Jean Groupe Société anonyme is reinvesting funds back into the business for growth but unfortunately it looks like sales haven't increased much just yet. Unsurprisingly then, the total return to shareholders over the last five years has been flat. All in all, the inherent trends aren't typical of multi-baggers, so if that's what you're after, we think you might have more luck elsewhere.

If you'd like to know more about Saint Jean Groupe Société anonyme, we've spotted 4 warning signs, and 2 of them shouldn't be ignored.

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.