The Returns At EcoRodovias Infraestrutura e Logística (BVMF:ECOR3) Aren't Growing

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's 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. With that in mind, the ROCE of EcoRodovias Infraestrutura e Logística (BVMF:ECOR3) looks decent, right now, so lets see what the trend of returns can tell us.

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

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 EcoRodovias Infraestrutura e Logística, this is the formula:

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

0.15 = R$2.7b ÷ (R$24b - R$5.0b) (Based on the trailing twelve months to September 2023).

Therefore, EcoRodovias Infraestrutura e Logística has an ROCE of 15%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Infrastructure industry average of 12%.

View our latest analysis for EcoRodovias Infraestrutura e Logística

In the above chart we have measured EcoRodovias Infraestrutura e Logística'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 EcoRodovias Infraestrutura e Logística.

So How Is EcoRodovias Infraestrutura e Logística's ROCE Trending?

While the returns on capital are good, they haven't moved much. The company has consistently earned 15% for the last five years, and the capital employed within the business has risen 140% in that time. Since 15% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. 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.

Our Take On EcoRodovias Infraestrutura e Logística's ROCE

To sum it up, EcoRodovias Infraestrutura e Logística has simply been reinvesting capital steadily, at those decent rates of return. However, despite the favorable fundamentals, the stock has fallen 20% over the last five years, so there might be an opportunity here for astute investors. That's why we think it'd be worthwhile to look further into this stock given the fundamentals are appealing.

One more thing to note, we've identified 1 warning sign with EcoRodovias Infraestrutura e Logística and understanding it should be part of your investment process.

While EcoRodovias Infraestrutura e Logística 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.