Intelbras - Indústria de Telecomunicação Eletrônica Brasileira (BVMF:INTB3) Is Reinvesting At Lower Rates Of Return

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base 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 Intelbras - Indústria de Telecomunicação Eletrônica Brasileira (BVMF:INTB3) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

Understanding Return On Capital Employed (ROCE)

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. The formula for this calculation on Intelbras - Indústria de Telecomunicação Eletrônica Brasileira is:

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

0.14 = R$540m ÷ (R$5.9b - R$2.2b) (Based on the trailing twelve months to September 2024).

Therefore, Intelbras - Indústria de Telecomunicação Eletrônica Brasileira has an ROCE of 14%. On its own, that's a standard return, however it's much better than the 7.4% generated by the Communications industry.

See our latest analysis for Intelbras - Indústria de Telecomunicação Eletrônica Brasileira

Above you can see how the current ROCE for Intelbras - Indústria de Telecomunicação Eletrônica Brasileira compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Intelbras - Indústria de Telecomunicação Eletrônica Brasileira for free.

So How Is Intelbras - Indústria de Telecomunicação Eletrônica Brasileira's ROCE Trending?

In terms of Intelbras - Indústria de Telecomunicação Eletrônica Brasileira's historical ROCE movements, the trend isn't fantastic. To be more specific, ROCE has fallen from 20% over the last five years. However, given capital employed and revenue have both increased it appears that the business is currently pursuing growth, at the consequence of short term returns. If these investments prove successful, this can bode very well for long term stock performance.

What We Can Learn From Intelbras - Indústria de Telecomunicação Eletrônica Brasileira's ROCE

In summary, despite lower returns in the short term, we're encouraged to see that Intelbras - Indústria de Telecomunicação Eletrônica Brasileira is reinvesting for growth and has higher sales as a result. However, despite the promising trends, the stock has fallen 52% over the last three years, so there might be an opportunity here for astute investors. So we think it'd be worthwhile to look further into this stock given the trends look encouraging.

Intelbras - Indústria de Telecomunicação Eletrônica Brasileira does have some risks though, and we've spotted 1 warning sign for Intelbras - Indústria de Telecomunicação Eletrônica Brasileira that you might be interested in.

While Intelbras - Indústria de Telecomunicação Eletrônica Brasileira 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.