Returns At bioMérieux (EPA:BIM) Appear To Be Weighed Down

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. 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, the ROCE of bioMérieux (EPA:BIM) looks decent, right now, so lets see what the trend of returns can tell us.

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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. 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 = €638m ÷ (€5.8b - €1.1b) (Based on the trailing twelve months to December 2024).

Therefore, bioMérieux has an ROCE of 14%. In absolute terms, that's a satisfactory return, but compared to the Medical Equipment industry average of 6.2% it's much better.

View our latest analysis for bioMérieux

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 analyst report for bioMérieux .

What Does the ROCE Trend For bioMérieux Tell Us?

While the returns on capital are good, they haven't moved much. The company has employed 77% more capital in the last five years, and the returns on that capital have remained stable at 14%. Since 14% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. 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.

One more thing to note, even though ROCE has remained relatively flat over the last five years, the reduction in current liabilities to 20% of total assets, is good to see from a business owner's perspective. This can eliminate some of the risks inherent in the operations because the business has less outstanding obligations to their suppliers and or short-term creditors than they did previously.

The Bottom Line On bioMérieux's ROCE

The main thing to remember is that bioMérieux has proven its ability to continually reinvest at respectable rates of return. And given the stock has only risen 1.6% over the last five years, we'd suspect the market is beginning to recognize these trends. That's why it could be worth your time looking into this stock further to discover if it has more traits of a multi-bagger.

bioMérieux could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation for BIM on our platform quite valuable.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high 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.