Ubisoft Entertainment (EPA:UBI) Has More To Do To Multiply In Value Going Forward
If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's 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. However, after investigating Ubisoft Entertainment (EPA:UBI), we don't think it's current trends fit the mold of a multi-bagger.
What Is Return On Capital Employed (ROCE)?
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. To calculate this metric for Ubisoft Entertainment, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.033 = €111m ÷ (€4.3b - €959m) (Based on the trailing twelve months to September 2025).
So, Ubisoft Entertainment has an ROCE of 3.3%. Ultimately, that's a low return and it under-performs the Entertainment industry average of 11%.
See our latest analysis for Ubisoft Entertainment
In the above chart we have measured Ubisoft Entertainment'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 Ubisoft Entertainment for free.
How Are Returns Trending?
There hasn't been much to report for Ubisoft Entertainment's returns and its level of capital employed because both metrics have been steady for the past five years. It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. So unless we see a substantial change at Ubisoft Entertainment in terms of ROCE and additional investments being made, we wouldn't hold our breath on it being a multi-bagger.
What We Can Learn From Ubisoft Entertainment's ROCE
In a nutshell, Ubisoft Entertainment has been trudging along with the same returns from the same amount of capital over the last five years. It seems that investors have little hope of these trends getting any better and that may have partly contributed to the stock collapsing 92% in the last five years. Therefore based on the analysis done in this article, we don't think Ubisoft Entertainment has the makings of a multi-bagger.
One final note, you should learn about the 2 warning signs we've spotted with Ubisoft Entertainment (including 1 which shouldn't be ignored) .
While Ubisoft Entertainment 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.