Brazilian Education Giant Afya Shows Strong Fundamentals, But Can It Deliver for Investors?

In the volatile world of growth stocks, identifying companies with sustainable financial engines is key. For investors watching the Brazilian education sector, Afya Ltd. (NASDAQ: AFYA) is presenting a compelling case based on its efficient use of capital.

The company, which operates a network of medical schools and digital education platforms across Brazil, has seen its Return on Capital Employed (ROCE) rise considerably over the past five years. ROCE, a measure of pre-tax profit relative to the capital invested in the business, stood at a solid 16% for the trailing twelve months to September 2025. This not only surpasses the industry average but signals improving profitability on each real invested.

More importantly, this growing return has been achieved alongside a massive 113% expansion of the company's capital base. This combination—higher returns on a much larger pool of capital—is a classic hallmark of companies capable of creating significant long-term shareholder value. Afya's strategy of reinvesting profits to expand its educational footprint and digital assets appears to be bearing fruit.

This fundamental strength contrasts with the stock's performance, which has declined 36% over the last five years, potentially creating a disconnect between market price and business performance. Analysts suggest this may offer an entry point for investors who believe in the long-term thesis of Brazil's private education demand and Afya's dominant position within medical studies.

Investor Voices:

"The ROCE trend is undeniable," says Marcus Thorne, a portfolio manager focused on Latin American equities. "Afya is executing a textbook playbook: grow scale and improve margins. The market seems to be discounting broader Brazilian macro risks, but the company-specific metrics are strong."

Dr. Ana Silva, an education sector analyst, offers a more cautious take: "While the capital efficiency is improving, the regulatory environment for private education in Brazil is always a variable. Their growth is impressive, but investors must weigh it against potential policy shifts and competitive pressures."

However, Carlos Ribeiro, a retail investor and frequent commentator on financial forums, expresses sharper criticism: "A 36% drop in five years is a disaster, no matter how you spin the ROCE. This looks like financial jargon trying to pretty up a stock that has consistently burned shareholders. Where's the return for *us*? I'll believe it when I see it reflected in the share price."

As with any investment, metrics like ROCE provide only one part of the picture. A full assessment requires examining valuation, debt levels, and future growth prospects in the context of Brazil's economic landscape. For now, Afya's operational story is one of a company building capacity and earning better returns on it—a necessary, if not sufficient, condition for a future rebound.

This analysis is based on historical data and analyst forecasts. It is for informational purposes only and does not constitute financial advice. Investors should conduct their own research or consult a financial advisor.