Cruzeiro do Sul Educacional (BVMF:CSED3) Has More To Do To Multiply In Value Going Forward

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. That's why when we briefly looked at Cruzeiro do Sul Educacional's (BVMF:CSED3) ROCE trend, we were pretty happy with what we saw.

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

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Cruzeiro do Sul Educacional:

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

0.13 = R$527m ÷ (R$4.8b - R$816m) (Based on the trailing twelve months to March 2025).

Therefore, Cruzeiro do Sul Educacional has an ROCE of 13%. On its own, that's a standard return, however it's much better than the 9.8% generated by the Consumer Services industry.

Check out our latest analysis for Cruzeiro do Sul Educacional

Above you can see how the current ROCE for Cruzeiro do Sul Educacional 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 Cruzeiro do Sul Educacional .

How Are Returns Trending?

While the returns on capital are good, they haven't moved much. The company has consistently earned 13% for the last five years, and the capital employed within the business has risen 121% in that time. 13% is a pretty standard return, and it provides some comfort knowing that Cruzeiro do Sul Educacional has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

On a side note, Cruzeiro do Sul Educacional has done well to reduce current liabilities to 17% of total assets over the last five years. Effectively suppliers now fund less of the business, which can lower some elements of risk.

What We Can Learn From Cruzeiro do Sul Educacional's ROCE

To sum it up, Cruzeiro do Sul Educacional has simply been reinvesting capital steadily, at those decent rates of return. And since the stock has risen strongly over the last three years, it appears the market might expect this trend to continue. So even though the stock might be more "expensive" than it was before, we think the strong fundamentals warrant this stock for further research.

If you're still interested in Cruzeiro do Sul Educacional it's worth checking out our FREE intrinsic value approximation for CSED3 to see if it's trading at an attractive price in other respects.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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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.