The Returns At Restaurant Brands International Limited Partnership (TSE:QSP.UN) Aren't Growing

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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. 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.

Understanding Return On Capital Employed (ROCE)

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed 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)

0.094 = US$2.0b ÷ (US$23b - US$1.8b) (Based on the trailing twelve months to June 2022).

So, Restaurant Brands International Limited Partnership has an ROCE of 9.4%. On its own that's a low return on capital but it's in line with the industry's average returns of 9.4%.

Check out our latest analysis for Restaurant Brands International Limited Partnership

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how Restaurant Brands International Limited Partnership has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

The Trend Of ROCE

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. 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 On Restaurant Brands International Limited Partnership's ROCE

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. And with the stock having returned a mere 5.0% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. Therefore, if you're looking for a multi-bagger, we'd propose looking at other options.

Restaurant Brands International Limited Partnership does have some risks, we noticed 4 warning signs (and 3 which shouldn't be ignored) we think you should know about.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.