Has Compañía Agropecuaria Copeval (SNSE:COPEVAL) Got What It Takes To Become A Multi-Bagger?

There are a few key trends to look for if we want to identify the next multi-bagger. 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. Having said that, from a first glance at Compañía Agropecuaria Copeval (SNSE:COPEVAL) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

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 Compañía Agropecuaria Copeval:

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

0.11 = CL$15b ÷ (CL$287b - CL$142b) (Based on the trailing twelve months to September 2020).

Therefore, Compañía Agropecuaria Copeval has an ROCE of 11%. On its own, that's a standard return, however it's much better than the 8.7% generated by the Trade Distributors industry.

Check out our latest analysis for Compañía Agropecuaria Copeval

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 Compañía Agropecuaria Copeval has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

What Does the ROCE Trend For Compañía Agropecuaria Copeval Tell Us?

Things have been pretty stable at Compañía Agropecuaria Copeval, with its capital employed and returns on that capital staying somewhat the same for the last five years. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. With that in mind, unless investment picks up again in the future, we wouldn't expect Compañía Agropecuaria Copeval to be a multi-bagger going forward.

Another thing to note, Compañía Agropecuaria Copeval has a high ratio of current liabilities to total assets of 49%. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. Ideally we'd like to see this reduce as that would mean fewer obligations bearing risks.

The Bottom Line On Compañía Agropecuaria Copeval's ROCE

In a nutshell, Compañía Agropecuaria Copeval has been trudging along with the same returns from the same amount of capital over the last five years. Since the stock has declined 23% over the last five years, investors may not be too optimistic on this trend improving either. Therefore based on the analysis done in this article, we don't think Compañía Agropecuaria Copeval has the makings of a multi-bagger.

Compañía Agropecuaria Copeval does come with some risks though, we found 3 warning signs in our investment analysis, and 1 of those is potentially serious...

While Compañía Agropecuaria Copeval 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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