Investors Could Be Concerned With Três Tentos Agroindustrial S/A's (BVMF:TTEN3) Returns On Capital

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. 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. However, after briefly looking over the numbers, we don't think Três Tentos Agroindustrial S/A (BVMF:TTEN3) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

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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. Analysts use this formula to calculate it for Três Tentos Agroindustrial S/A:

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

0.16 = R$1.1b ÷ (R$12b - R$4.7b) (Based on the trailing twelve months to June 2025).

So, Três Tentos Agroindustrial S/A has an ROCE of 16%. In absolute terms, that's a satisfactory return, but compared to the Food industry average of 8.2% it's much better.

View our latest analysis for Três Tentos Agroindustrial S/A

In the above chart we have measured Três Tentos Agroindustrial S/A'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 Três Tentos Agroindustrial S/A for free.

What Does the ROCE Trend For Três Tentos Agroindustrial S/A Tell Us?

When we looked at the ROCE trend at Três Tentos Agroindustrial S/A, we didn't gain much confidence. To be more specific, ROCE has fallen from 32% over the last five years. Although, given both revenue and the amount of assets employed in the business have increased, it could suggest the company is investing in growth, and the extra capital has led to a short-term reduction in ROCE. If these investments prove successful, this can bode very well for long term stock performance.

On a side note, Três Tentos Agroindustrial S/A has done well to pay down its current liabilities to 41% of total assets. That could partly explain why the ROCE has dropped. Effectively this means their suppliers or short-term creditors are funding less of the business, which reduces some elements of risk. Some would claim this reduces the business' efficiency at generating ROCE since it is now funding more of the operations with its own money. Either way, they're still at a pretty high level, so we'd like to see them fall further if possible.

Our Take On Três Tentos Agroindustrial S/A's ROCE

While returns have fallen for Três Tentos Agroindustrial S/A in recent times, we're encouraged to see that sales are growing and that the business is reinvesting in its operations. And the stock has followed suit returning a meaningful 35% to shareholders over the last three years. So while investors seem to be recognizing these promising trends, we would look further into this stock to make sure the other metrics justify the positive view.

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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.