Stock Analysis

bioMérieux (EPA:BIM) Has More To Do To Multiply In Value Going Forward

ENXTPA:BIM
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What are the early trends we should look for to identify a stock that could multiply in value over the long term? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing 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, the ROCE of bioMérieux (EPA:BIM) looks decent, right now, so lets see what the trend of returns can tell us.

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

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for bioMérieux, this is the formula:

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

0.14 = €583m ÷ (€5.0b - €981m) (Based on the trailing twelve months to June 2023).

Thus, bioMérieux has an ROCE of 14%. In absolute terms, that's a satisfactory return, but compared to the Medical Equipment industry average of 8.6% it's much better.

See our latest analysis for bioMérieux

roce
ENXTPA:BIM Return on Capital Employed January 6th 2024

In the above chart we have measured bioMérieux's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free report for bioMérieux.

What Does the ROCE Trend For bioMérieux Tell Us?

The trend of ROCE doesn't stand out much, but returns on a whole are decent. The company has consistently earned 14% for the last five years, and the capital employed within the business has risen 68% in that time. 14% is a pretty standard return, and it provides some comfort knowing that bioMérieux has consistently earned this amount. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

In Conclusion...

To sum it up, bioMérieux has simply been reinvesting capital steadily, at those decent rates of return. And since the stock has risen strongly over the last five years, it appears the market might expect this trend to continue. So even though the stock might be more "expensive" than it was before, we think the strong fundamentals warrant this stock for further research.

If you'd like to know about the risks facing bioMérieux, we've discovered 1 warning sign that you should be aware of.

While bioMérieux 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.