Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount 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. Although, when we looked at Restaurant Brands International Limited Partnership (TSE:QSP.UN), it didn't seem to tick all of these boxes.

Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Restaurant Brands International Limited Partnership is:

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

0.099 = US$2.3b ÷ (US$25b - US$2.2b) (Based on the trailing twelve months to September 2024).

Therefore, Restaurant Brands International Limited Partnership has an ROCE of 9.9%. In absolute terms, that's a low return but it's around the Hospitality industry average of 11%.

Check out our latest analysis for Restaurant Brands International Limited Partnership TSX:QSP.UN Return on Capital Employed December 2nd 2024

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 freegraph 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?

There hasn't been much to report for Restaurant Brands International Limited Partnership's returns and its level of capital employed because both metrics have been steady for the past five years. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. So don't be surprised if Restaurant Brands International Limited Partnership doesn't end up being a multi-bagger in a few years time.

The Bottom Line

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 33% 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.

Story Continues

Restaurant Brands International Limited Partnership does have some risks though, and we've spotted  2 warning signs for Restaurant Brands International Limited Partnership that you might be interested in.

While Restaurant Brands International Limited Partnership 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 freelist here.

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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.

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