Investors Met With Slowing Returns on Capital At Coca-Cola Europacific Partners (AMS:CCEP)

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. With that in mind, the ROCE of Coca-Cola Europacific Partners (AMS:CCEP) looks decent, right now, so lets see what the trend of returns can tell us.

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. Analysts use this formula to calculate it for Coca-Cola Europacific Partners:

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

0.10 = €2.3b ÷ (€32b - €8.9b) (Based on the trailing twelve months to June 2024).

Therefore, Coca-Cola Europacific Partners has an ROCE of 10%. That's a pretty standard return and it's in line with the industry average of 9.9%.

Check out our latest analysis for Coca-Cola Europacific Partners

Above you can see how the current ROCE for Coca-Cola Europacific Partners compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Coca-Cola Europacific Partners for free.

How Are Returns Trending?

The trend of ROCE doesn't stand out much, but returns on a whole are decent. The company has consistently earned 10% for the last five years, and the capital employed within the business has risen 58% in that time. 10% is a pretty standard return, and it provides some comfort knowing that Coca-Cola Europacific Partners has consistently earned this amount. 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.

Our Take On Coca-Cola Europacific Partners' ROCE

To sum it up, Coca-Cola Europacific Partners has simply been reinvesting capital steadily, at those decent rates of return. And the stock has followed suit returning a meaningful 64% to shareholders over the last five years. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

One more thing, we've spotted 2 warning signs facing Coca-Cola Europacific Partners that you might find interesting.

While Coca-Cola Europacific Partners may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.