A Look Into Cury Construtora e Incorporadora's (BVMF:CURY3) Impressive Returns On Capital

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, the ROCE of Cury Construtora e Incorporadora (BVMF:CURY3) looks attractive right now, so lets see what the trend of returns can tell us.

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. To calculate this metric for Cury Construtora e Incorporadora, this is the formula:

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

0.28 = R$312m ÷ (R$2.0b - R$929m) (Based on the trailing twelve months to June 2021).

Therefore, Cury Construtora e Incorporadora has an ROCE of 28%. In absolute terms that's a great return and it's even better than the Consumer Durables industry average of 10%.

See our latest analysis for Cury Construtora e Incorporadora

Above you can see how the current ROCE for Cury Construtora e Incorporadora compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Cury Construtora e Incorporadora here for free.

So How Is Cury Construtora e Incorporadora's ROCE Trending?

It's hard not to be impressed by Cury Construtora e Incorporadora's returns on capital. The company has consistently earned 28% for the last five years, and the capital employed within the business has risen 95% in that time. With returns that high, it's great that the business can continually reinvest its money at such appealing rates of return. You'll see this when looking at well operated businesses or favorable business models.

Another thing to note, Cury Construtora e Incorporadora has a high ratio of current liabilities to total assets of 46%. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. While it's not necessarily a bad thing, it can be beneficial if this ratio is lower.

Our Take On Cury Construtora e Incorporadora's ROCE

In short, we'd argue Cury Construtora e Incorporadora has the makings of a multi-bagger since its been able to compound its capital at very profitable rates of return. Yet over the last year the stock has declined 32%, so the decline might provide an opening. That's why we think it'd be worthwhile to look further into this stock given the fundamentals are appealing.

One more thing to note, we've identified 2 warning signs with Cury Construtora e Incorporadora and understanding them should be part of your investment process.

High returns are a key ingredient to strong performance, so check out our free list ofstocks earning high returns on equity with solid balance sheets.

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.

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