MRS Logística (BVMF:MRSA3B) Is Looking To Continue Growing Its Returns On Capital

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So on that note, MRS Logística (BVMF:MRSA3B) looks quite promising in regards to its trends of return on capital.

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. Analysts use this formula to calculate it for MRS Logística:

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

0.18 = R$2.7b ÷ (R$18b - R$2.7b) (Based on the trailing twelve months to September 2024).

Thus, MRS Logística has an ROCE of 18%. On its own, that's a standard return, however it's much better than the 12% generated by the Transportation industry.

View our latest analysis for MRS Logística

Historical performance is a great place to start when researching a stock so above you can see the gauge for MRS Logística's ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of MRS Logística.

So How Is MRS Logística's ROCE Trending?

Investors would be pleased with what's happening at MRS Logística. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 18%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 65%. So we're very much inspired by what we're seeing at MRS Logística thanks to its ability to profitably reinvest capital.

What We Can Learn From MRS Logística's ROCE

In summary, it's great to see that MRS Logística can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 70% return over the last five years. In light of that, we think it's worth looking further into this stock because if MRS Logística can keep these trends up, it could have a bright future ahead.

If you want to know some of the risks facing MRS Logística we've found 2 warning signs (1 is potentially serious!) that you should be aware of before investing here.

While MRS 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.