Inmobiliaria Manquehue (SNSE:MANQUEHUE) Is Looking To Continue Growing Its Returns On Capital

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, Inmobiliaria Manquehue (SNSE:MANQUEHUE) looks quite promising in regards to its trends of return on capital.

What Is 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. Analysts use this formula to calculate it for Inmobiliaria Manquehue:

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

0.091 = CL$23b ÷ (CL$351b - CL$102b) (Based on the trailing twelve months to September 2022).

Therefore, Inmobiliaria Manquehue has an ROCE of 9.1%. In absolute terms, that's a low return and it also under-performs the Consumer Durables industry average of 12%.

View our latest analysis for Inmobiliaria Manquehue

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 Inmobiliaria Manquehue, check out these free graphs here.

What Does the ROCE Trend For Inmobiliaria Manquehue Tell Us?

Inmobiliaria Manquehue has not disappointed with their ROCE growth. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 194% over the last five years. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. It's worth looking deeper into this though because while it's great that the business is more efficient, it might also mean that going forward the areas to invest internally for the organic growth are lacking.

The Key Takeaway

To sum it up, Inmobiliaria Manquehue is collecting higher returns from the same amount of capital, and that's impressive. Given the stock has declined 61% in the last three years, this could be a good investment if the valuation and other metrics are also appealing. With that in mind, we believe the promising trends warrant this stock for further investigation.

Inmobiliaria Manquehue does have some risks though, and we've spotted 2 warning signs for Inmobiliaria Manquehue that you might be interested in.

While Inmobiliaria Manquehue 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.