Investors Met With Slowing Returns on Capital At Grupo Mateus (BVMF:GMAT3)

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. That's why when we briefly looked at Grupo Mateus' (BVMF:GMAT3) ROCE trend, we were pretty happy with what we saw.

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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. To calculate this metric for Grupo Mateus, this is the formula:

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

0.15 = R$2.2b ÷ (R$20b - R$5.2b) (Based on the trailing twelve months to March 2025).

So, Grupo Mateus has an ROCE of 15%. On its own, that's a standard return, however it's much better than the 11% generated by the Consumer Retailing industry.

Check out our latest analysis for Grupo Mateus

Above you can see how the current ROCE for Grupo Mateus 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 Grupo Mateus for free.

What Can We Tell From Grupo Mateus' ROCE Trend?

The trend of ROCE doesn't stand out much, but returns on a whole are decent. The company has consistently earned 15% for the last five years, and the capital employed within the business has risen 332% in that time. Since 15% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

Our Take On Grupo Mateus' ROCE

To sum it up, Grupo Mateus has simply been reinvesting capital steadily, at those decent rates of return. And the stock has followed suit returning a meaningful 85% to shareholders 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.

If you're still interested in Grupo Mateus it's worth checking out our FREE intrinsic value approximation for GMAT3 to see if it's trading at an attractive price in other respects.

While Grupo Mateus 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. 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.