Impresa - Sociedade Gestora de Participações Sociais (ELI:IPR) Has Some Way To Go To Become A Multi-Bagger

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Although, when we looked at Impresa - Sociedade Gestora de Participações Sociais (ELI:IPR), it didn't seem to tick all of these boxes.

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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. The formula for this calculation on Impresa - Sociedade Gestora de Participações Sociais is:

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

0.06 = €12m ÷ (€340m - €139m) (Based on the trailing twelve months to June 2025).

So, Impresa - Sociedade Gestora de Participações Sociais has an ROCE of 6.0%. In absolute terms, that's a low return and it also under-performs the Media industry average of 11%.

See our latest analysis for Impresa - Sociedade Gestora de Participações Sociais

Historical performance is a great place to start when researching a stock so above you can see the gauge for Impresa - Sociedade Gestora de Participações Sociais' ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Impresa - Sociedade Gestora de Participações Sociais.

What Does the ROCE Trend For Impresa - Sociedade Gestora de Participações Sociais Tell Us?

We're a bit concerned with the trends, because the business is applying 23% less capital than it was five years ago and returns on that capital have stayed flat. When a company effectively decreases its assets base, it's not usually a sign to be optimistic on that company. In addition to that, since the ROCE doesn't scream "quality" at 6.0%, it's hard to get excited about these developments.

On a separate but related note, it's important to know that Impresa - Sociedade Gestora de Participações Sociais has a current liabilities to total assets ratio of 41%, which we'd consider pretty high. This effectively means that suppliers (or short-term creditors) are funding a large portion of the business, so just be aware that this can introduce some elements of risk. Ideally we'd like to see this reduce as that would mean fewer obligations bearing risks.

In Conclusion...

In summary, Impresa - Sociedade Gestora de Participações Sociais isn't reinvesting funds back into the business and returns aren't growing. Although the market must be expecting these trends to improve because the stock has gained 93% 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.

If you want to know some of the risks facing Impresa - Sociedade Gestora de Participações Sociais we've found 3 warning signs (2 are a bit concerning!) that you should be aware of before investing here.

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.