Returns At M. Dias Branco Indústria e Comércio de Alimentos (BVMF:MDIA3) Appear To Be Weighed Down

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Having said that, from a first glance at M. Dias Branco Indústria e Comércio de Alimentos (BVMF:MDIA3) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

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

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. The formula for this calculation on M. Dias Branco Indústria e Comércio de Alimentos is:

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

0.095 = R$975m ÷ (R$13b - R$2.4b) (Based on the trailing twelve months to September 2024).

Thus, M. Dias Branco Indústria e Comércio de Alimentos has an ROCE of 9.5%. In absolute terms, that's a low return but it's around the Food industry average of 9.8%.

Check out our latest analysis for M. Dias Branco Indústria e Comércio de Alimentos

In the above chart we have measured M. Dias Branco Indústria e Comércio de Alimentos' prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering M. Dias Branco Indústria e Comércio de Alimentos for free.

What Does the ROCE Trend For M. Dias Branco Indústria e Comércio de Alimentos Tell Us?

There are better returns on capital out there than what we're seeing at M. Dias Branco Indústria e Comércio de Alimentos. Over the past five years, ROCE has remained relatively flat at around 9.5% and the business has deployed 51% more capital into its operations. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

In Conclusion...

In summary, M. Dias Branco Indústria e Comércio de Alimentos has simply been reinvesting capital and generating the same low rate of return as before. Since the stock has declined 28% over the last five years, investors may not be too optimistic on this trend improving either. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere.

While M. Dias Branco Indústria e Comércio de Alimentos doesn't shine too bright in this respect, it's still worth seeing if the company is trading at attractive prices. You can find that out with our FREE intrinsic value estimation for MDIA3 on our platform.

While M. Dias Branco Indústria e Comércio de Alimentos 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.