Compañía Cervecerías Unidas (SNSE:CCU) Will Be Hoping To Turn Its Returns On Capital Around

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Having said that, from a first glance at Compañía Cervecerías Unidas (SNSE:CCU) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

Return On Capital Employed (ROCE): What Is It?

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. The formula for this calculation on Compañía Cervecerías Unidas is:

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

0.056 = CL$164b ÷ (CL$3.7t - CL$759b) (Based on the trailing twelve months to September 2024).

So, Compañía Cervecerías Unidas has an ROCE of 5.6%. In absolute terms, that's a low return and it also under-performs the Beverage industry average of 9.5%.

View our latest analysis for Compañía Cervecerías Unidas

In the above chart we have measured Compañía Cervecerías Unidas' prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Compañía Cervecerías Unidas for free.

So How Is Compañía Cervecerías Unidas' ROCE Trending?

In terms of Compañía Cervecerías Unidas' historical ROCE movements, the trend isn't fantastic. Over the last five years, returns on capital have decreased to 5.6% from 13% five years ago. Meanwhile, the business is utilizing more capital but this hasn't moved the needle much in terms of sales in the past 12 months, so this could reflect longer term investments. It's worth keeping an eye on the company's earnings from here on to see if these investments do end up contributing to the bottom line.

In Conclusion...

To conclude, we've found that Compañía Cervecerías Unidas is reinvesting in the business, but returns have been falling. And investors may be recognizing these trends since the stock has only returned a total of 2.9% to shareholders over the last five years. So if you're looking for a multi-bagger, the underlying trends indicate you may have better chances elsewhere.

Compañía Cervecerías Unidas does have some risks, we noticed 3 warning signs (and 1 which shouldn't be ignored) we think 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.