Yahoo Finance Returns On Capital At Restaurant Brands International Limited Partnership (TSE:QSP.UN) Have Stalled
If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Although, when we looked at Restaurant Brands International Limited Partnership (TSE:QSP.UN), it didn't seem to tick all of these boxes.
Return On Capital Employed (ROCE): What Is It?
If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from 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)
0.10 = US$2.2b ÷ (US$23b - US$1.9b) (Based on the trailing twelve months to March 2024).
Thus, Restaurant Brands International Limited Partnership has an ROCE of 10%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Hospitality industry average of 11%.
See our latest analysis for Restaurant Brands International Limited Partnership
Historical performance is a great place to start when researching a stock so above you can see the gauge for Restaurant Brands International Limited Partnership's ROCE against it's prior returns. If you're interested in investigating Restaurant Brands International Limited Partnership's past further, check out this free graph covering Restaurant Brands International Limited Partnership's past earnings, revenue and cash flow.
What Can We Tell From Restaurant Brands International Limited Partnership's ROCE Trend?
Over the past five years, Restaurant Brands International Limited Partnership's ROCE and capital employed have both remained mostly flat. It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. 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.
Our Take On Restaurant Brands International Limited Partnership's ROCE
In a nutshell, Restaurant Brands International Limited Partnership has been trudging along with the same returns from the same amount of capital over the last five years. And investors may be recognizing these trends since the stock has only returned a total of 21% to shareholders over the last five years. As a result, if you're hunting for a multi-bagger, we think you'd have more luck elsewhere.
One final note, you should learn about the 3 warning signs we've spotted with Restaurant Brands International Limited Partnership (including 2 which don't sit too well with us) .
While Restaurant Brands International Limited Partnership isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.
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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.
