The Return Trends At Saint Jean Groupe Société anonyme (EPA:SABE) Look Promising

If you're looking for a multi-bagger, there's a few things to keep an eye out for. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing 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. 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.

What is Return On Capital Employed (ROCE)?

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. Analysts use this formula to calculate it for Saint Jean Groupe Société anonyme:

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

0.014 = €1.4m ÷ (€129m - €25m) (Based on the trailing twelve months to December 2020).

Therefore, Saint Jean Groupe Société anonyme has an ROCE of 1.4%. Ultimately, that's a low return and it under-performs the Food industry average of 8.5%.

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 want to delve into the historical earnings, revenue and cash flow of Saint Jean Groupe Société anonyme, check out these free graphs here.

How Are Returns Trending?

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. Shareholders would no doubt be pleased with this because the business was loss-making five years ago but is is now generating 1.4% on its capital. Not only that, but the company is utilizing 36% 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.

The Bottom Line

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. Since the stock has returned a staggering 103% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if Saint Jean Groupe Société anonyme can keep these trends up, it could have a bright future ahead.

On a final note, we found 3 warning signs for Saint Jean Groupe Société anonyme (2 are concerning) you should be aware of.

While Saint Jean Groupe Société anonyme may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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This article by Simply Wall St is general in nature. 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.
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