Returns On Capital Are Showing Encouraging Signs At Echeverría Izquierdo (SNSE:EISA)

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So on that note, Echeverría Izquierdo (SNSE:EISA) looks quite promising in regards to its trends of return on capital.

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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. To calculate this metric for Echeverría Izquierdo, this is the formula:

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

0.13 = CL$39b ÷ (CL$552b - CL$243b) (Based on the trailing twelve months to June 2025).

So, Echeverría Izquierdo has an ROCE of 13%. That's a relatively normal return on capital, and it's around the 12% generated by the Construction industry.

Check out our latest analysis for Echeverría Izquierdo

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how Echeverría Izquierdo has performed in the past in other metrics, you can view this free graph of Echeverría Izquierdo's past earnings, revenue and cash flow.

What Does the ROCE Trend For Echeverría Izquierdo Tell Us?

We like the trends that we're seeing from Echeverría Izquierdo. The data shows that returns on capital have increased substantially over the last five years to 13%. The amount of capital employed has increased too, by 41%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

On a separate but related note, it's important to know that Echeverría Izquierdo has a current liabilities to total assets ratio of 44%, 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.

The Bottom Line On Echeverría Izquierdo's ROCE

In summary, it's great to see that Echeverría Izquierdo can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. Therefore, we think it would be worth your time to check if these trends are going to continue.

Echeverría Izquierdo does come with some risks though, we found 3 warning signs in our investment analysis, and 2 of those are concerning...

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.