Fleury (BVMF:FLRY3) Has Some Way To Go To Become A Multi-Bagger

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, the ROCE of Fleury (BVMF:FLRY3) looks decent, right now, so lets see what the trend of returns can tell us.

Understanding Return On Capital Employed (ROCE)

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on Fleury is:

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

0.14 = R$683m ÷ (R$6.0b - R$1.2b) (Based on the trailing twelve months to March 2022).

So, Fleury has an ROCE of 14%. On its own, that's a standard return, however it's much better than the 7.8% generated by the Healthcare industry.

Check out our latest analysis for Fleury

In the above chart we have measured Fleury's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Fleury.

What Does the ROCE Trend For Fleury Tell Us?

While the returns on capital are good, they haven't moved much. The company has consistently earned 14% for the last five years, and the capital employed within the business has risen 95% in that time. Since 14% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. 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.

What We Can Learn From Fleury's ROCE

The main thing to remember is that Fleury has proven its ability to continually reinvest at respectable rates of return. Yet over the last five years the stock has declined 25%, so the decline might provide an opening. For that reason, savvy investors might want to look further into this company in case it's a prime investment.

One more thing, we've spotted 2 warning signs facing Fleury that you might find interesting.

While Fleury 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.