Returns On Capital At Companhia de Saneamento de Minas Gerais (BVMF:CSMG3) Have Stalled

If you're looking for a multi-bagger, there's a few things to keep an eye out for. 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, the ROCE of Companhia de Saneamento de Minas Gerais (BVMF:CSMG3) looks decent, right now, so lets see what the trend of returns can tell us.

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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 Companhia de Saneamento de Minas Gerais, this is the formula:

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

0.13 = R$1.9b ÷ (R$17b - R$2.0b) (Based on the trailing twelve months to September 2025).

Therefore, Companhia de Saneamento de Minas Gerais has an ROCE of 13%. On its own, that's a standard return, however it's much better than the 8.0% generated by the Water Utilities industry.

See our latest analysis for Companhia de Saneamento de Minas Gerais

In the above chart we have measured Companhia de Saneamento de Minas Gerais' prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Companhia de Saneamento de Minas Gerais .

What Does the ROCE Trend For Companhia de Saneamento de Minas Gerais Tell Us?

While the returns on capital are good, they haven't moved much. The company has consistently earned 13% for the last five years, and the capital employed within the business has risen 40% in that time. 13% is a pretty standard return, and it provides some comfort knowing that Companhia de Saneamento de Minas Gerais has consistently earned this amount. 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 On Companhia de Saneamento de Minas Gerais' ROCE

The main thing to remember is that Companhia de Saneamento de Minas Gerais has proven its ability to continually reinvest at respectable rates of return. And the stock has done incredibly well with a 303% return over the last five years, so long term investors are no doubt ecstatic with that result. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

If you want to know some of the risks facing Companhia de Saneamento de Minas Gerais we've found 3 warning signs (2 are significant!) that you should be aware of before investing here.

While Companhia de Saneamento de Minas Gerais 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.