UK Markets closed
  • FTSE 100

    7,122.32
    -6.89 (-0.10%)
     
  • FTSE 250

    22,646.08
    -38.76 (-0.17%)
     
  • AIM

    1,182.30
    -6.44 (-0.54%)
     
  • GBP/EUR

    1.1703
    -0.0063 (-0.54%)
     
  • GBP/USD

    1.3238
    -0.0064 (-0.4819%)
     
  • BTC-GBP

    40,582.30
    -2,615.96 (-6.06%)
     
  • CMC Crypto 200

    1,364.92
    -76.84 (-5.33%)
     
  • S&P 500

    4,538.43
    -38.67 (-0.84%)
     
  • DOW

    34,580.08
    -59.71 (-0.17%)
     
  • CRUDE OIL

    66.41
    -0.09 (-0.14%)
     
  • GOLD FUTURES

    1,784.40
    +21.70 (+1.23%)
     
  • NIKKEI 225

    28,029.57
    +276.20 (+1.00%)
     
  • HANG SENG

    23,766.69
    -22.24 (-0.09%)
     
  • DAX

    15,169.98
    -93.13 (-0.61%)
     
  • CAC 40

    6,765.52
    -30.23 (-0.44%)
     
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

B&M European Value Retail (LON:BME) Could Become A Multi-Bagger

·2-min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

There are a few key trends to look for if we want to identify the next multi-bagger. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount 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. Speaking of which, we noticed some great changes in B&M European Value Retail's (LON:BME) returns on capital, so let's have a look.    

 What is 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. To calculate this metric for B&M European Value Retail, this is the formula: 

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

0.23 = UK£607m ÷ (UK£3.4b - UK£731m) (Based on the trailing twelve months to March 2021).

 Therefore, B&M European Value Retail has an ROCE of 23%. That's a fantastic return and not only that, it outpaces the average of 19% earned by companies in a similar industry.   

Check out our latest analysis for B&M European Value Retail

 In the above chart we have measured B&M European Value Retail'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 B&M European Value Retail here for free. 

 The Trend Of ROCE 

 B&M European Value Retail is displaying some positive trends. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 23%. The amount of capital employed has increased too, by 94%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.   

 What We Can Learn From B&M European Value Retail's ROCE 

 All in all, it's terrific to see that B&M European Value Retail is reaping the rewards from prior investments and is growing its capital base. And a remarkable 184% total return over the last five years tells us that investors are expecting more good things to come in the future. Therefore, we think it would be worth your time to check if these trends are going to continue.   

 One more thing: We've identified 3 warning signs with B&M European Value Retail (at least 1 which is significant) , and understanding these would certainly be useful.   

 B&M European Value Retail is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals. 

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting