Shareholders Would Enjoy A Repeat Of Inter Parfums' (NASDAQ:IPAR) Recent Growth In Returns

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing 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 the ROCE trend of Inter Parfums (NASDAQ:IPAR) we really liked what we saw.

Return On Capital Employed (ROCE): What Is It?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for Inter Parfums, this is the formula:

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

0.24 = US$251m ÷ (US$1.4b - US$325m) (Based on the trailing twelve months to December 2023).

So, Inter Parfums has an ROCE of 24%. In absolute terms that's a great return and it's even better than the Personal Products industry average of 16%.

View our latest analysis for Inter Parfums

Above you can see how the current ROCE for Inter Parfums compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Inter Parfums .

What Can We Tell From Inter Parfums' ROCE Trend?

We like the trends that we're seeing from Inter Parfums. The data shows that returns on capital have increased substantially over the last five years to 24%. The amount of capital employed has increased too, by 72%. So we're very much inspired by what we're seeing at Inter Parfums thanks to its ability to profitably reinvest capital.

The Bottom Line On Inter Parfums' 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 Inter Parfums has. Since the stock has returned a solid 95% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

Inter Parfums does have some risks though, and we've spotted 2 warning signs for Inter Parfums that you might be interested in.

High returns are a key ingredient to strong performance, so check out our free list ofstocks 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.