Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So, when we ran our eye over Bijou Brigitte modische Accessoires' (ETR:BIJ) trend of ROCE, we liked what we saw.
Return On Capital Employed (ROCE): What Is It?
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 Bijou Brigitte modische Accessoires:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.15 = €51m ÷ (€400m - €70m) (Based on the trailing twelve months to December 2022).
Therefore, Bijou Brigitte modische Accessoires has an ROCE of 15%. That's a relatively normal return on capital, and it's around the 14% generated by the Luxury industry.
View our latest analysis for Bijou Brigitte modische Accessoires
Historical performance is a great place to start when researching a stock so above you can see the gauge for Bijou Brigitte modische Accessoires' ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Bijou Brigitte modische Accessoires, check out these free graphs here.
So How Is Bijou Brigitte modische Accessoires' ROCE Trending?
The trend of ROCE doesn't stand out much, but returns on a whole are decent. Over the past five years, ROCE has remained relatively flat at around 15% and the business has deployed 35% more capital into its operations. 15% is a pretty standard return, and it provides some comfort knowing that Bijou Brigitte modische Accessoires 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.
In Conclusion...
The main thing to remember is that Bijou Brigitte modische Accessoires has proven its ability to continually reinvest at respectable rates of return. And given the stock has only risen 34% over the last five years, we'd suspect the market is beginning to recognize these trends. So to determine if Bijou Brigitte modische Accessoires is a multi-bagger going forward, we'd suggest digging deeper into the company's other fundamentals.