Slowing Rates Of Return At Localiza Rent a Car (BVMF:RENT3) Leave Little Room For Excitement

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base 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 ran our eye over Localiza Rent a Car's (BVMF:RENT3) trend of ROCE, we liked what we saw.

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What Is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Localiza Rent a Car, this is the formula:

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

0.11 = R$7.6b ÷ (R$83b - R$14b) (Based on the trailing twelve months to September 2025).

Thus, Localiza Rent a Car has an ROCE of 11%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Transportation industry average of 13%.

Check out our latest analysis for Localiza Rent a Car

Above you can see how the current ROCE for Localiza Rent a Car 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 analyst report for Localiza Rent a Car .

What Can We Tell From Localiza Rent a Car's ROCE Trend?

The trend of ROCE doesn't stand out much, but returns on a whole are decent. Over the past five years, ROCE has remained relatively flat at around 11% and the business has deployed 303% more capital into its operations. Since 11% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

The Bottom Line

The main thing to remember is that Localiza Rent a Car has proven its ability to continually reinvest at respectable rates of return. Yet over the last five years the stock has declined 14%, so the decline might provide an opening. For that reason, savvy investors might want to look further into this company in case it's a prime investment.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 2 warning signs for Localiza Rent a Car (of which 1 is a bit unpleasant!) that you should know about.

While Localiza Rent a Car 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.