Slowing Rates Of Return At Compagnie de l'Odet (EPA:ODET) Leave Little Room For Excitement

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding 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. Although, when we looked at Compagnie de l'Odet (EPA:ODET), it didn't seem to tick all of these boxes.

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 Compagnie de l'Odet:

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

0.021 = €869m ÷ (€54b - €12b) (Based on the trailing twelve months to December 2022).

So, Compagnie de l'Odet has an ROCE of 2.1%. In absolute terms, that's a low return and it also under-performs the Logistics industry average of 14%.

View our latest analysis for Compagnie de l'Odet

Historical performance is a great place to start when researching a stock so above you can see the gauge for Compagnie de l'Odet's ROCE against it's prior returns. If you'd like to look at how Compagnie de l'Odet has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

The Trend Of ROCE

Over the past five years, Compagnie de l'Odet'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 Compagnie de l'Odet doesn't end up being a multi-bagger in a few years time.

Our Take On Compagnie de l'Odet's ROCE

We can conclude that in regards to Compagnie de l'Odet's returns on capital employed and the trends, there isn't much change to report on. Although the market must be expecting these trends to improve because the stock has gained 78% over the last five years. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.

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

While Compagnie de l'Odet 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.