Ampla Energia e Serviços (BVMF:CBEE3) Hasn't Managed To Accelerate Its Returns

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Having said that, from a first glance at Ampla Energia e Serviços (BVMF:CBEE3) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

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What Is 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. To calculate this metric for Ampla Energia e Serviços, this is the formula:

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

0.083 = R$1.1b ÷ (R$20b - R$6.9b) (Based on the trailing twelve months to March 2025).

Therefore, Ampla Energia e Serviços has an ROCE of 8.3%. Ultimately, that's a low return and it under-performs the Electric Utilities industry average of 12%.

Check out our latest analysis for Ampla Energia e Serviços

Historical performance is a great place to start when researching a stock so above you can see the gauge for Ampla Energia e Serviços' ROCE against it's prior returns. If you're interested in investigating Ampla Energia e Serviços' past further, check out this free graph covering Ampla Energia e Serviços' past earnings, revenue and cash flow.

The Trend Of ROCE

In terms of Ampla Energia e Serviços' historical ROCE trend, it doesn't exactly demand attention. The company has consistently earned 8.3% for the last five years, and the capital employed within the business has risen 87% in that time. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.

In Conclusion...

In summary, Ampla Energia e Serviços has simply been reinvesting capital and generating the same low rate of return as before. And in the last five years, the stock has given away 24% so the market doesn't look too hopeful on these trends strengthening any time soon. Therefore based on the analysis done in this article, we don't think Ampla Energia e Serviços has the makings of a multi-bagger.

One more thing: We've identified 5 warning signs with Ampla Energia e Serviços (at least 2 which shouldn't be ignored) , and understanding these would certainly be useful.

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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.