Stock Analysis

Slowing Rates Of Return At Ingevec (SNSE:INGEVEC) Leave Little Room For Excitement

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If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. 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. However, after briefly looking over the numbers, we don't think Ingevec (SNSE:INGEVEC) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

What Is 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. The formula for this calculation on Ingevec is:

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

0.08 = CL$10.0b ÷ (CL$202b - CL$77b) (Based on the trailing twelve months to June 2022).

Thus, Ingevec has an ROCE of 8.0%. In absolute terms, that's a low return, but it's much better than the Construction industry average of 6.6%.

View our latest analysis for Ingevec

SNSE:INGEVEC Return on Capital Employed September 2nd 2022

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 want to delve into the historical earnings, revenue and cash flow of Ingevec, check out these free graphs here.

What Can We Tell From Ingevec's ROCE Trend?

There are better returns on capital out there than what we're seeing at Ingevec. The company has consistently earned 8.0% for the last five years, and the capital employed within the business has risen 156% in that time. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

Our Take On Ingevec's ROCE

In conclusion, Ingevec has been investing more capital into the business, but returns on that capital haven't increased. Additionally, the stock's total return to shareholders over the last five years has been flat, which isn't too surprising. All in all, the inherent trends aren't typical of multi-baggers, so if that's what you're after, we think you might have more luck elsewhere.

Ingevec does have some risks, we noticed 3 warning signs (and 1 which is potentially serious) we think you should know about.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

Valuation is complex, but we're helping make it simple.

Find out whether Ingevec is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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Ingevec S.A., together with its subsidiaries, engages in the engineering and construction of public and private infrastructure in Chile.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Future Growth0
Past Performance2
Financial Health3

Read more about these checks in the individual report sections or in our analysis model.

Good value with mediocre balance sheet.