OSX Brasil (BVMF:OSXB3) Is Doing The Right Things To Multiply Its Share Price

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at OSX Brasil (BVMF:OSXB3) and its 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. To calculate this metric for OSX Brasil, this is the formula:

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

0.04 = R$77m ÷ (R$2.7b - R$799m) (Based on the trailing twelve months to June 2023).

Therefore, OSX Brasil has an ROCE of 4.0%. Ultimately, that's a low return and it under-performs the Energy Services industry average of 9.4%.

See our latest analysis for OSX Brasil

Historical performance is a great place to start when researching a stock so above you can see the gauge for OSX Brasil's ROCE against it's prior returns. If you'd like to look at how OSX Brasil has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

What Does the ROCE Trend For OSX Brasil Tell Us?

OSX Brasil has recently broken into profitability so their prior investments seem to be paying off. About five years ago the company was generating losses but things have turned around because it's now earning 4.0% on its capital. And unsurprisingly, like most companies trying to break into the black, OSX Brasil is utilizing 55% more capital than it was five years ago. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, both common traits of a multi-bagger.

Our Take On OSX Brasil's ROCE

To the delight of most shareholders, OSX Brasil has now broken into profitability. Astute investors may have an opportunity here because the stock has declined 11% in the last five years. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

One more thing, we've spotted 3 warning signs facing OSX Brasil that you might find interesting.

While OSX Brasil 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.