Cury Construtora e Incorporadora (BVMF:CURY3) Is Aiming To Keep Up Its Impressive Returns

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. 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, when we ran our eye over Cury Construtora e Incorporadora's (BVMF:CURY3) trend of ROCE, we really liked what we saw.

Return On Capital Employed (ROCE): What Is It?

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 Cury Construtora e Incorporadora is:

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

0.30 = R$670m ÷ (R$3.4b - R$1.2b) (Based on the trailing twelve months to March 2024).

So, Cury Construtora e Incorporadora has an ROCE of 30%. That's a fantastic return and not only that, it outpaces the average of 5.8% earned by companies in a similar industry.

Check out 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're interested, you can view the analysts predictions in our free analyst report for Cury Construtora e Incorporadora .

The Trend Of ROCE

It's hard not to be impressed by Cury Construtora e Incorporadora's returns on capital. Over the past five years, ROCE has remained relatively flat at around 30% and the business has deployed 250% more capital into its operations. Now considering ROCE is an attractive 30%, this combination is actually pretty appealing because it means the business can consistently put money to work and generate these high returns. If these trends can continue, it wouldn't surprise us if the company became a multi-bagger.

On a side note, Cury Construtora e Incorporadora has done well to reduce current liabilities to 34% of total assets over the last five years. Effectively suppliers now fund less of the business, which can lower some elements of risk.

The Bottom Line On Cury Construtora e Incorporadora's ROCE

In summary, we're delighted to see that Cury Construtora e Incorporadora has been compounding returns by reinvesting at consistently high rates of return, as these are common traits of a multi-bagger. And long term investors would be thrilled with the 144% return they've received over the last three years. So while the positive underlying trends may be accounted for by investors, we still think this stock is worth looking into further.

Like most companies, Cury Construtora e Incorporadora does come with some risks, and we've found 1 warning sign that you should be aware of.

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.

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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.

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