Construtora Adolpho Lindenberg's (BVMF:CALI3) Returns On Capital Are Heading Higher

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. 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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. With that in mind, we've noticed some promising trends at Construtora Adolpho Lindenberg (BVMF:CALI3) so let's look a bit deeper.

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Understanding 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. The formula for this calculation on Construtora Adolpho Lindenberg is:

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

0.018 = R$9.8m ÷ (R$635m - R$90m) (Based on the trailing twelve months to June 2025).

Thus, Construtora Adolpho Lindenberg has an ROCE of 1.8%. In absolute terms, that's a low return and it also under-performs the Construction industry average of 12%.

View our latest analysis for Construtora Adolpho Lindenberg

Historical performance is a great place to start when researching a stock so above you can see the gauge for Construtora Adolpho Lindenberg's ROCE against it's prior returns. If you'd like to look at how Construtora Adolpho Lindenberg has performed in the past in other metrics, you can view this free graph of Construtora Adolpho Lindenberg's past earnings, revenue and cash flow.

What Does the ROCE Trend For Construtora Adolpho Lindenberg Tell Us?

The fact that Construtora Adolpho Lindenberg is now generating some pre-tax profits from its prior investments is very encouraging. About five years ago the company was generating losses but things have turned around because it's now earning 1.8% on its capital. Not only that, but the company is utilizing 592% more capital than before, but that's to be expected from a company trying to break into profitability. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.

The Bottom Line

Long story short, we're delighted to see that Construtora Adolpho Lindenberg's reinvestment activities have paid off and the company is now profitable. Since the stock has returned a staggering 121% to shareholders over the last three years, it looks like investors are recognizing these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

Construtora Adolpho Lindenberg does have some risks, we noticed 6 warning signs (and 5 which are significant) we think you should know about.

While Construtora Adolpho Lindenberg isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.