The Return Trends At Interparfums (EPA:ITP) Look Promising

There are a few key trends to look for if we want to identify the next multi-bagger. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So when we looked at Interparfums (EPA:ITP) and its trend of ROCE, we really liked what we saw.

What is 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. To calculate this metric for Interparfums, this is the formula:

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

0.16 = €102m ÷ (€792m - €144m) (Based on the trailing twelve months to June 2021).

So, Interparfums has an ROCE of 16%. On its own, that's a standard return, however it's much better than the 9.8% generated by the Personal Products industry.

See our latest analysis for Interparfums

In the above chart we have measured Interparfums' prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

What Does the ROCE Trend For Interparfums Tell Us?

The trends we've noticed at Interparfums are quite reassuring. Over the last five years, returns on capital employed have risen substantially to 16%. The amount of capital employed has increased too, by 43%. So we're very much inspired by what we're seeing at Interparfums thanks to its ability to profitably reinvest capital.

What We Can Learn From Interparfums' 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 Interparfums has. And a remarkable 339% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if Interparfums can keep these trends up, it could have a bright future ahead.

If you want to continue researching Interparfums, you might be interested to know about the 1 warning sign that our analysis has discovered.

While Interparfums 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.