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If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. 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. In light of that, when we looked at Bijou Brigitte modische Accessoires (ETR:BIJ) and its ROCE trend, we weren't exactly thrilled.
Return On Capital Employed (ROCE): What Is It?
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. The formula for this calculation on Bijou Brigitte modische Accessoires is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.11 = €37m ÷ (€407m - €69m) (Based on the trailing twelve months to June 2024).
Thus, Bijou Brigitte modische Accessoires has an ROCE of 11%. By itself that's a normal return on capital and it's in line with the industry's average returns of 11%.
Check out 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 , check out these free graphs detailing revenue and cash flow performance of Bijou Brigitte modische Accessoires.
So How Is Bijou Brigitte modische Accessoires' ROCE Trending?
Things have been pretty stable at Bijou Brigitte modische Accessoires, with its capital employed and returns on that capital staying somewhat the same for the last five years. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. With that in mind, unless investment picks up again in the future, we wouldn't expect Bijou Brigitte modische Accessoires to be a multi-bagger going forward.
What We Can Learn From Bijou Brigitte modische Accessoires' ROCE
In a nutshell, Bijou Brigitte modische Accessoires has been trudging along with the same returns from the same amount of capital over the last five years. And in the last five years, the stock has given away 15% so the market doesn't look too hopeful on these trends strengthening any time soon. All in all, the inherent trends aren't typical of multi-baggers, so if that's what you're after, we think you might have more luck elsewhere.