Investors Met With Slowing Returns on Capital At bioMérieux (EPA:BIM)

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? 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. So, when we ran our eye over bioMérieux's (EPA:BIM) trend of ROCE, we liked what we saw.

What Is Return On Capital Employed (ROCE)?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for bioMérieux:

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

0.14 = €569m ÷ (€5.3b - €1.1b) (Based on the trailing twelve months to December 2023).

So, bioMérieux has an ROCE of 14%. On its own, that's a standard return, however it's much better than the 8.5% generated by the Medical Equipment industry.

Check out our latest analysis for bioMérieux

Above you can see how the current ROCE for bioMérieux compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for bioMérieux .

So How Is bioMérieux's ROCE Trending?

The trend of ROCE doesn't stand out much, but returns on a whole are decent. The company has employed 54% more capital in the last five years, and the returns on that capital have remained stable at 14%. 14% is a pretty standard return, and it provides some comfort knowing that bioMérieux has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

What We Can Learn From bioMérieux's ROCE

In the end, bioMérieux has proven its ability to adequately reinvest capital at good rates of return. Therefore it's no surprise that shareholders have earned a respectable 50% return if they held over the last five years. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

bioMérieux does have some risks though, and we've spotted 1 warning sign for bioMérieux that you might be interested in.

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.