Groupe MEDIA 6 (EPA:EDI) Hasn't Managed To Accelerate Its Returns

There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Although, when we looked at Groupe MEDIA 6 (EPA:EDI), it didn't seem to tick all of these boxes.

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. Analysts use this formula to calculate it for Groupe MEDIA 6:

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

0.12 = €5.6m ÷ (€74m - €28m) (Based on the trailing twelve months to September 2023).

Thus, Groupe MEDIA 6 has an ROCE of 12%. That's a pretty standard return and it's in line with the industry average of 12%.

Check out our latest analysis for Groupe MEDIA 6

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'd like to look at how Groupe MEDIA 6 has performed in the past in other metrics, you can view this free graph of Groupe MEDIA 6's past earnings, revenue and cash flow.

The Trend Of ROCE

Over the past five years, Groupe MEDIA 6's ROCE and capital employed have both remained mostly flat. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. So don't be surprised if Groupe MEDIA 6 doesn't end up being a multi-bagger in a few years time.

The Bottom Line On Groupe MEDIA 6's ROCE

In a nutshell, Groupe MEDIA 6 has been trudging along with the same returns from the same amount of capital over the last five years. And investors may be recognizing these trends since the stock has only returned a total of 30% to shareholders over the last five years. As a result, if you're hunting for a multi-bagger, we think you'd have more luck elsewhere.

Groupe MEDIA 6 does come with some risks though, we found 3 warning signs in our investment analysis, and 2 of those can't be ignored...

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com