Returns On Capital At Restaurant Brands International Limited Partnership (TSE:QSP.UN) Have Stalled

What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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. However, after briefly looking over the numbers, we don't think Restaurant Brands International Limited Partnership (TSE:QSP.UN) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

What Is Return On Capital Employed (ROCE)?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its 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$2.1b ÷ (US$23b - US$2.1b) (Based on the trailing twelve months to September 2023).

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 of past earnings, revenue and cash flow.

What Can We Tell From Restaurant Brands International Limited Partnership's ROCE Trend?

There hasn't been much to report for Restaurant Brands International Limited Partnership's returns and its level of capital employed because both metrics have been steady for the past five years. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. So unless we see a substantial change at Restaurant Brands International Limited Partnership in terms of ROCE and additional investments being made, we wouldn't hold our breath on it being a multi-bagger.

The Bottom Line

We can conclude that in regards to Restaurant Brands International Limited Partnership's returns on capital employed and the trends, there isn't much change to report on. Although the market must be expecting these trends to improve because the stock has gained 60% over the last five years. Ultimately, if the underlying trends persist, we wouldn't hold our breath on it being a multi-bagger going forward.

Restaurant Brands International Limited Partnership does have some risks, we noticed 3 warning signs (and 2 which are a bit concerning) we think you should know about.

While Restaurant Brands International Limited Partnership may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.