Motiva Infraestrutura de Mobilidade (BVMF:MOTV3) Might Be Having Difficulty Using Its Capital Effectively

If you're looking for a multi-bagger, there's a few things to keep an eye out for. 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. However, after briefly looking over the numbers, we don't think Motiva Infraestrutura de Mobilidade (BVMF:MOTV3) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

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

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Motiva Infraestrutura de Mobilidade:

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

0.10 = R$5.7b ÷ (R$63b - R$5.7b) (Based on the trailing twelve months to March 2025).

Thus, Motiva Infraestrutura de Mobilidade has an ROCE of 10%. That's a relatively normal return on capital, and it's around the 12% generated by the Infrastructure industry.

View our latest analysis for Motiva Infraestrutura de Mobilidade

In the above chart we have measured Motiva Infraestrutura de Mobilidade'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 analyst report for Motiva Infraestrutura de Mobilidade .

How Are Returns Trending?

On the surface, the trend of ROCE at Motiva Infraestrutura de Mobilidade doesn't inspire confidence. Over the last five years, returns on capital have decreased to 10% from 13% five years ago. Although, given both revenue and the amount of assets employed in the business have increased, it could suggest the company is investing in growth, and the extra capital has led to a short-term reduction in ROCE. And if the increased capital generates additional returns, the business, and thus shareholders, will benefit in the long run.

On a related note, Motiva Infraestrutura de Mobilidade has decreased its current liabilities to 9.0% of total assets. So we could link some of this to the decrease in ROCE. Effectively this means their suppliers or short-term creditors are funding less of the business, which reduces some elements of risk. Since the business is basically funding more of its operations with it's own money, you could argue this has made the business less efficient at generating ROCE.

What We Can Learn From Motiva Infraestrutura de Mobilidade's ROCE

While returns have fallen for Motiva Infraestrutura de Mobilidade in recent times, we're encouraged to see that sales are growing and that the business is reinvesting in its operations. These trends are starting to be recognized by investors since the stock has delivered a 7.1% gain to shareholders who've held over the last five years. So this stock may still be an appealing investment opportunity, if other fundamentals prove to be sound.

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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.