Return Trends At Allpark Empreendimentos Participações e Serviços (BVMF:ALPK3) Aren't Appealing

If you're looking for a multi-bagger, there's a few things to keep an eye out for. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount 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. Having said that, from a first glance at Allpark Empreendimentos Participações e Serviços (BVMF:ALPK3) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

What Is Return On Capital Employed (ROCE)?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on Allpark Empreendimentos Participações e Serviços is:

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

0.079 = R$159m ÷ (R$2.7b - R$698m) (Based on the trailing twelve months to March 2023).

Thus, Allpark Empreendimentos Participações e Serviços has an ROCE of 7.9%. In absolute terms, that's a low return and it also under-performs the Commercial Services industry average of 14%.

View our latest analysis for Allpark Empreendimentos Participações e Serviços

Above you can see how the current ROCE for Allpark Empreendimentos Participações e Serviços compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Allpark Empreendimentos Participações e Serviços.

So How Is Allpark Empreendimentos Participações e Serviços' ROCE Trending?

The returns on capital haven't changed much for Allpark Empreendimentos Participações e Serviços in recent years. Over the past five years, ROCE has remained relatively flat at around 7.9% and the business has deployed 40% more capital into its operations. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

The Key Takeaway

In summary, Allpark Empreendimentos Participações e Serviços has simply been reinvesting capital and generating the same low rate of return as before. And investors appear hesitant that the trends will pick up because the stock has fallen 48% in the last three years. Therefore based on the analysis done in this article, we don't think Allpark Empreendimentos Participações e Serviços has the makings of a multi-bagger.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 3 warning signs for Allpark Empreendimentos Participações e Serviços (of which 2 are a bit unpleasant!) that you should know about.

While Allpark Empreendimentos Participações e Serviços 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.