Return Trends At Fleury (BVMF:FLRY3) Aren't Appealing

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So, when we ran our eye over Fleury's (BVMF:FLRY3) trend of ROCE, we liked what we saw.

What is 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. To calculate this metric for Fleury, this is the formula:

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

0.14 = R$667m ÷ (R$6.1b - R$1.2b) (Based on the trailing twelve months to December 2021).

So, Fleury has an ROCE of 14%. On its own, that's a standard return, however it's much better than the 11% 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 Can We Tell From Fleury's ROCE Trend?

The trend of ROCE doesn't stand out much, but returns on a whole are decent. The company has consistently earned 14% for the last five years, and the capital employed within the business has risen 88% in that time. 14% is a pretty standard return, and it provides some comfort knowing that Fleury has consistently earned this amount. 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.

The Bottom Line

In the end, Fleury has proven its ability to adequately reinvest capital at good rates of return. Despite the good fundamentals, total returns from the stock have been virtually flat over the last five years. For that reason, savvy investors might want to look further into this company in case it's a prime investment.

Fleury does have some risks though, and we've spotted 3 warning signs for Fleury that you might be interested in.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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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.