Returns On Capital Are Showing Encouraging Signs At SLC Agrícola (BVMF:SLCE3)

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. With that in mind, we've noticed some promising trends at SLC Agrícola (BVMF:SLCE3) so let's look a bit deeper.

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Understanding Return On Capital Employed (ROCE)

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. To calculate this metric for SLC Agrícola, this is the formula:

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

0.16 = R$2.0b ÷ (R$17b - R$5.4b) (Based on the trailing twelve months to March 2025).

So, SLC Agrícola has an ROCE of 16%. In absolute terms, that's a satisfactory return, but compared to the Food industry average of 9.5% it's much better.

Check out our latest analysis for SLC Agrícola

In the above chart we have measured SLC Agrícola's 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 SLC Agrícola for free.

What Does the ROCE Trend For SLC Agrícola Tell Us?

SLC Agrícola is displaying some positive trends. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 16%. Basically the business is earning more per dollar of capital invested and in addition to that, 141% more capital is being employed now too. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

The Bottom Line

All in all, it's terrific to see that SLC Agrícola is reaping the rewards from prior investments and is growing its capital base. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. In light of that, we think it's worth looking further into this stock because if SLC Agrícola can keep these trends up, it could have a bright future ahead.

On a separate note, we've found 1 warning sign for SLC Agrícola you'll probably want to know about.

While SLC Agrícola 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.