Returns Are Gaining Momentum At Devernois (EPA:ALDEV)
To find a multi-bagger stock, what are the underlying trends we should look for in a business? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Speaking of which, we noticed some great changes in Devernois' (EPA:ALDEV) 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. Analysts use this formula to calculate it for Devernois:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.029 = €540k ÷ (€27m - €8.4m) (Based on the trailing twelve months to June 2025).
So, Devernois has an ROCE of 2.9%. Ultimately, that's a low return and it under-performs the Luxury industry average of 6.1%.
View our latest analysis for Devernois
Historical performance is a great place to start when researching a stock so above you can see the gauge for Devernois' ROCE against it's prior returns. If you're interested in investigating Devernois' past further, check out this free graph covering Devernois' past earnings, revenue and cash flow.
What Does the ROCE Trend For Devernois Tell Us?
Shareholders will be relieved that Devernois has broken into profitability. The company now earns 2.9% on its capital, because five years ago it was incurring losses. On top of that, what's interesting is that the amount of capital being employed has remained steady, so the business hasn't needed to put any additional money to work to generate these higher returns. So while we're happy that the business is more efficient, just keep in mind that could mean that going forward the business is lacking areas to invest internally for growth. So if you're looking for high growth, you'll want to see a business's capital employed also increasing.
The Bottom Line
In summary, we're delighted to see that Devernois has been able to increase efficiencies and earn higher rates of return on the same amount of capital. And since the stock has fallen 60% over the last five years, there might be an opportunity here. With that in mind, we believe the promising trends warrant this stock for further investigation.
If you'd like to know more about Devernois, we've spotted 2 warning signs, and 1 of them can't be ignored.
For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.
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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.