Returns At Companhia de Eletricidade do Estado da Bahia - COELBA (BVMF:CEEB3) Are On The Way Up

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount 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 when we looked at Companhia de Eletricidade do Estado da Bahia - COELBA (BVMF:CEEB3) and its trend of ROCE, we really 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 Companhia de Eletricidade do Estado da Bahia - COELBA, this is the formula:

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

0.16 = R$4.3b ÷ (R$33b - R$6.2b) (Based on the trailing twelve months to September 2025).

So, Companhia de Eletricidade do Estado da Bahia - COELBA has an ROCE of 16%. In absolute terms, that's a satisfactory return, but compared to the Electric Utilities industry average of 12% it's much better.

Check out our latest analysis for Companhia de Eletricidade do Estado da Bahia - COELBA

Historical performance is a great place to start when researching a stock so above you can see the gauge for Companhia de Eletricidade do Estado da Bahia - COELBA's ROCE against it's prior returns. If you're interested in investigating Companhia de Eletricidade do Estado da Bahia - COELBA's past further, check out this free graph covering Companhia de Eletricidade do Estado da Bahia - COELBA's past earnings, revenue and cash flow.

What Can We Tell From Companhia de Eletricidade do Estado da Bahia - COELBA's ROCE Trend?

Investors would be pleased with what's happening at Companhia de Eletricidade do Estado da Bahia - COELBA. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 16%. The amount of capital employed has increased too, by 59%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

The Bottom Line

In summary, it's great to see that Companhia de Eletricidade do Estado da Bahia - COELBA 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 with a respectable 97% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. In light of that, we think it's worth looking further into this stock because if Companhia de Eletricidade do Estado da Bahia - COELBA can keep these trends up, it could have a bright future ahead.

One more thing to note, we've identified 1 warning sign with Companhia de Eletricidade do Estado da Bahia - COELBA and understanding this should be part of your investment process.

While Companhia de Eletricidade do Estado da Bahia - COELBA isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.