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. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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. In light of that, when we looked at Restaurant Brands International (NYSE:QSR) and its ROCE trend, we weren't exactly thrilled.
Understanding Return On Capital Employed (ROCE)
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. Analysts use this formula to calculate it for Restaurant Brands International:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.10 = US$2.3b ÷ (US$25b - US$2.6b) (Based on the trailing twelve months to March 2025).
Thus, Restaurant Brands International has an ROCE of 10%. By itself that's a normal return on capital and it's in line with the industry's average returns of 10%.
View our latest analysis for Restaurant Brands International
In the above chart we have measured Restaurant Brands International'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 Restaurant Brands International .
So How Is Restaurant Brands International's ROCE Trending?
There hasn't been much to report for Restaurant Brands International's returns and its level of capital employed because both metrics have been steady for the past five years. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. With that in mind, unless investment picks up again in the future, we wouldn't expect Restaurant Brands International to be a multi-bagger going forward. That being the case, it makes sense that Restaurant Brands International has been paying out 67% of its earnings to its shareholders. Most shareholders probably know this and own the stock for its dividend.
In Conclusion...
In summary, Restaurant Brands International isn't compounding its earnings but is generating stable returns on the same amount of capital employed. Since the stock has gained an impressive 43% over the last five years, investors must think there's better things to come. But if the trajectory of these underlying trends continue, we think the likelihood of it being a multi-bagger from here isn't high.
If you want to know some of the risks facing Restaurant Brands International we've found 3 warning signs (1 doesn't sit too well with us!) that you should be aware of before investing here.
While Restaurant Brands International 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.