Intelbras - Indústria de Telecomunicação Eletrônica Brasileira (BVMF:INTB3) Will Be Hoping To Turn Its Returns On Capital Around

To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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.

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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 Intelbras - Indústria de Telecomunicação Eletrônica Brasileira, this is the formula:

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

0.11 = R$431m ÷ (R$5.6b - R$1.6b) (Based on the trailing twelve months to September 2025).

Therefore, Intelbras - Indústria de Telecomunicação Eletrônica Brasileira has an ROCE of 11%. On its own, that's a standard return, however it's much better than the 7.0% generated by the Communications industry.

Check out our latest analysis for Intelbras - Indústria de Telecomunicação Eletrônica Brasileira

In the above chart we have measured Intelbras - Indústria de Telecomunicação Eletrônica Brasileira'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 Intelbras - Indústria de Telecomunicação Eletrônica Brasileira for free.

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

On the surface, the trend of ROCE at Intelbras - Indústria de Telecomunicação Eletrônica Brasileira doesn't inspire confidence. To be more specific, ROCE has fallen from 25% over the last five years. Meanwhile, the business is utilizing more capital but this hasn't moved the needle much in terms of sales in the past 12 months, so this could reflect longer term investments. It's worth keeping an eye on the company's earnings from here on to see if these investments do end up contributing to the bottom line.

On a side note, Intelbras - Indústria de Telecomunicação Eletrônica Brasileira has done well to pay down its current liabilities to 29% of total assets. So we could link some of this to the decrease in ROCE. What's more, this can reduce some aspects of risk to the business because now the company's suppliers or short-term creditors are funding less of its operations. Some would claim this reduces the business' efficiency at generating ROCE since it is now funding more of the operations with its own money.

The Bottom Line

Bringing it all together, while we're somewhat encouraged by Intelbras - Indústria de Telecomunicação Eletrônica Brasileira's reinvestment in its own business, we're aware that returns are shrinking. And in the last three years, the stock has given away 54% so the market doesn't look too hopeful on these trends strengthening any time soon. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere.

One more thing, we've spotted 1 warning sign facing Intelbras - Indústria de Telecomunicação Eletrônica Brasileira that you might find interesting.

While Intelbras - Indústria de Telecomunicação Eletrônica Brasileira 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.