Here's What Moncler's (BIT:MONC) Strong Returns On Capital Mean

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. That's why when we briefly looked at Moncler's (BIT:MONC) ROCE trend, we were very happy with what we saw.

Understanding Return On Capital Employed (ROCE)

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. Analysts use this formula to calculate it for Moncler:

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

0.24 = €927m ÷ (€4.7b - €845m) (Based on the trailing twelve months to June 2024).

Thus, Moncler has an ROCE of 24%. That's a fantastic return and not only that, it outpaces the average of 13% earned by companies in a similar industry.

View our latest analysis for Moncler

In the above chart we have measured Moncler's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Moncler for free.

So How Is Moncler's ROCE Trending?

It's hard not to be impressed by Moncler's returns on capital. Over the past five years, ROCE has remained relatively flat at around 24% and the business has deployed 137% more capital into its operations. Now considering ROCE is an attractive 24%, this combination is actually pretty appealing because it means the business can consistently put money to work and generate these high returns. If Moncler can keep this up, we'd be very optimistic about its future.

Our Take On Moncler's ROCE

Moncler has demonstrated its proficiency by generating high returns on increasing amounts of capital employed, which we're thrilled about. In light of this, the stock has only gained 28% over the last five years for shareholders who have owned the stock in this period. 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.

If you'd like to know about the risks facing Moncler, we've discovered 1 warning sign that you should be aware of.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning 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.