Restaurant Brands International Limited Partnership's (TSE:QSP.UN) Returns Have Hit A Wall

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding 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. Although, when we looked at Restaurant Brands International Limited Partnership (TSE:QSP.UN), it didn't seem to tick all of these boxes.

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 Restaurant Brands International Limited Partnership:

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

0.10 = US$2.2b ÷ (US$23b - US$1.9b) (Based on the trailing twelve months to March 2024).

Thus, Restaurant Brands International Limited Partnership has an ROCE of 10%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Hospitality industry average of 11%.

Check out our latest analysis for Restaurant Brands International Limited Partnership

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

So How Is Restaurant Brands International Limited Partnership's ROCE Trending?

Things have been pretty stable at Restaurant Brands International Limited Partnership, with its capital employed and returns on that capital staying somewhat the same for the last five years. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. With that in mind, unless investment picks up again in the future, we wouldn't expect Restaurant Brands International Limited Partnership to be a multi-bagger going forward.

The Bottom Line On Restaurant Brands International Limited Partnership's ROCE

In a nutshell, Restaurant Brands International Limited Partnership has been trudging along with the same returns from the same amount of capital over the last five years. Unsurprisingly, the stock has only gained 17% over the last five years, which potentially indicates that investors are accounting for this going forward. Therefore, if you're looking for a multi-bagger, we'd propose looking at other options.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 3 warning signs for Restaurant Brands International Limited Partnership (of which 2 make us uncomfortable!) that you should know about.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com