We Like These Underlying Trends At Kepler Weber (BVMF:KEPL3)

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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. So on that note, Kepler Weber (BVMF:KEPL3) looks quite promising in regards to its trends of return on capital.

What is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Kepler Weber is:

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

0.16 = R$88m ÷ (R$851m - R$297m) (Based on the trailing twelve months to September 2020).

Therefore, Kepler Weber has an ROCE of 16%. In absolute terms, that's a satisfactory return, but compared to the Machinery industry average of 8.0% it's much better.

See our latest analysis for Kepler Weber

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

The Trend Of ROCE

Kepler Weber's ROCE growth is quite impressive. The figures show that over the last five years, ROCE has grown 228% whilst employing roughly the same amount of capital. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

The Key Takeaway

To bring it all together, Kepler Weber has done well to increase the returns it's generating from its capital employed. And a remarkable 154% 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 to note, we've identified 1 warning sign with Kepler Weber and understanding it should be part of your investment process.

While Kepler Weber 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. 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.
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