What We Make Of Saint Jean Groupe Société anonyme's (EPA:SABE) Returns On Capital

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at Saint Jean Groupe Société anonyme (EPA:SABE) and its trend of ROCE, we really liked what we saw.

Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from 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 = €2.1m ÷ (€122m - €21m) (Based on the trailing twelve months to June 2020).

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 7.3%.

Check out our latest analysis for Saint Jean Groupe Société anonyme

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. 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 Does the ROCE Trend For Saint Jean Groupe Société anonyme Tell Us?

While in absolute terms it isn't a high ROCE, it's promising to see that it has been moving in the right direction. Over the last five years, returns on capital employed have risen substantially to 2.1%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 59%. So we're very much inspired by what we're seeing at Saint Jean Groupe Société anonyme thanks to its ability to profitably reinvest capital.

What We Can Learn From Saint Jean Groupe Société anonyme's ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Saint Jean Groupe Société anonyme has. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

Saint Jean Groupe Société anonyme does have some risks, we noticed 3 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

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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