Stock Analysis

Here's What To Make Of Vamos Locação de Caminhões Máquinas e Equipamentos' (BVMF:VAMO3) Decelerating Rates Of Return

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BOVESPA:VAMO3
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If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base 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. That's why when we briefly looked at Vamos Locação de Caminhões Máquinas e Equipamentos' (BVMF:VAMO3) ROCE trend, we were pretty happy with what we saw.

Understanding Return On Capital Employed (ROCE)

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. Analysts use this formula to calculate it for Vamos Locação de Caminhões Máquinas e Equipamentos:

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

0.13 = R$1.6b ÷ (R$17b - R$4.3b) (Based on the trailing twelve months to December 2022).

So, Vamos Locação de Caminhões Máquinas e Equipamentos has an ROCE of 13%. That's a relatively normal return on capital, and it's around the 12% generated by the Transportation industry.

View our latest analysis for Vamos Locação de Caminhões Máquinas e Equipamentos

roce
BOVESPA:VAMO3 Return on Capital Employed March 15th 2023

Above you can see how the current ROCE for Vamos Locação de Caminhões Máquinas e Equipamentos compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Vamos Locação de Caminhões Máquinas e Equipamentos here for free.

What Does the ROCE Trend For Vamos Locação de Caminhões Máquinas e Equipamentos Tell Us?

While the current returns on capital are decent, they haven't changed much. The company has consistently earned 13% for the last five years, and the capital employed within the business has risen 752% in that time. Since 13% 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.

The Bottom Line

In the end, Vamos Locação de Caminhões Máquinas e Equipamentos has proven its ability to adequately reinvest capital at good rates of return. And since the stock has risen strongly over the last year, it appears the market might expect this trend to continue. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

One final note, you should learn about the 3 warning signs we've spotted with Vamos Locação de Caminhões Máquinas e Equipamentos (including 2 which make us uncomfortable) .

While Vamos Locação de Caminhões Máquinas e Equipamentos isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

Valuation is complex, but we're helping make it simple.

Find out whether Vamos Locação de Caminhões Máquinas e Equipamentos is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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