CCR (BVMF:CCRO3) Is Investing Its Capital With Increasing Efficiency

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount 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 looked at the ROCE trend of CCR (BVMF:CCRO3) we really liked what we saw.

Return On Capital Employed (ROCE): What Is It?

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 CCR is:

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

0.26 = R$10b ÷ (R$51b - R$11b) (Based on the trailing twelve months to December 2022).

Thus, CCR has an ROCE of 26%. In absolute terms that's a great return and it's even better than the Infrastructure industry average of 12%.

See our latest analysis for CCR

Above you can see how the current ROCE for CCR compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

So How Is CCR's ROCE Trending?

CCR is displaying some positive trends. The data shows that returns on capital have increased substantially over the last five years to 26%. The amount of capital employed has increased too, by 61%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

Our Take On CCR's ROCE

To sum it up, CCR has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Considering the stock has delivered 30% to its stockholders over the last five years, it may be fair to think that investors aren't fully aware of the promising trends yet. So with that in mind, we think the stock deserves further research.

CCR does come with some risks though, we found 3 warning signs in our investment analysis, and 1 of those is potentially serious...

CCR is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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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.