Livetech da Bahia Indústria e Comércio (BVMF:LVTC3) Might Be Having Difficulty Using Its Capital Effectively

What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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. Although, when we looked at Livetech da Bahia Indústria e Comércio (BVMF:LVTC3), it didn't seem to tick all of these boxes.

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What Is Return On Capital Employed (ROCE)?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on Livetech da Bahia Indústria e Comércio is:

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

0.05 = R$53m ÷ (R$1.4b - R$373m) (Based on the trailing twelve months to June 2025).

So, Livetech da Bahia Indústria e Comércio has an ROCE of 5.0%. In absolute terms, that's a low return and it also under-performs the Communications industry average of 7.7%.

View our latest analysis for Livetech da Bahia Indústria e Comércio

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Livetech da Bahia Indústria e Comércio.

What Does the ROCE Trend For Livetech da Bahia Indústria e Comércio Tell Us?

On the surface, the trend of ROCE at Livetech da Bahia Indústria e Comércio doesn't inspire confidence. Over the last five years, returns on capital have decreased to 5.0% from 22% five years ago. However it looks like Livetech da Bahia Indústria e Comércio might be reinvesting for long term growth because while capital employed has increased, the company's sales haven't changed much in the last 12 months. 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, Livetech da Bahia Indústria e Comércio has done well to pay down its current liabilities to 26% of total assets. That could partly explain why the ROCE has dropped. 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 Key Takeaway

To conclude, we've found that Livetech da Bahia Indústria e Comércio is reinvesting in the business, but returns have been falling. Since the stock has declined 59% over the last three years, investors may not be too optimistic on this trend improving either. On the whole, we aren't too inspired by the underlying trends and we think there may be better chances of finding a multi-bagger elsewhere.

One final note, you should learn about the 5 warning signs we've spotted with Livetech da Bahia Indústria e Comércio (including 4 which don't sit too well with us) .

While Livetech da Bahia Indústria e Comércio 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.