Corticeira Amorim S.G.P.S (ELI:COR) Hasn't Managed To Accelerate Its Returns

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount 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. With that in mind, the ROCE of Corticeira Amorim S.G.P.S (ELI:COR) looks decent, right now, so lets see what the trend of returns can tell us.

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 Corticeira Amorim S.G.P.S:

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

0.13 = €126m ÷ (€1.5b - €536m) (Based on the trailing twelve months to December 2023).

So, Corticeira Amorim S.G.P.S has an ROCE of 13%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Packaging industry average of 11%.

Check out our latest analysis for Corticeira Amorim S.G.P.S

In the above chart we have measured Corticeira Amorim S.G.P.S' prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Corticeira Amorim S.G.P.S .

What Can We Tell From Corticeira Amorim S.G.P.S' ROCE Trend?

The trend of ROCE doesn't stand out much, but returns on a whole are decent. Over the past five years, ROCE has remained relatively flat at around 13% and the business has deployed 54% more capital into its operations. 13% is a pretty standard return, and it provides some comfort knowing that Corticeira Amorim S.G.P.S has consistently earned this amount. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

In Conclusion...

The main thing to remember is that Corticeira Amorim S.G.P.S has proven its ability to continually reinvest at respectable rates of return. And given the stock has only risen 7.0% over the last five years, we'd suspect the market is beginning to recognize these trends. So to determine if Corticeira Amorim S.G.P.S is a multi-bagger going forward, we'd suggest digging deeper into the company's other fundamentals.

Corticeira Amorim S.G.P.S could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation for COR on our platform quite valuable.

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.