Viña Concha y Toro (SNSE:CONCHATORO) Has More To Do To Multiply In Value Going Forward

What trends should we look for it we want to identify stocks that can multiply in value over the long term? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount 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. With that in mind, the ROCE of Viña Concha y Toro (SNSE:CONCHATORO) looks decent, right now, so lets see what the trend of returns can tell us.

What is Return On Capital Employed (ROCE)?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. To calculate this metric for Viña Concha y Toro, this is the formula:

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

0.13 = CL$127b ÷ (CL$1.3t - CL$318b) (Based on the trailing twelve months to June 2021).

Thus, Viña Concha y Toro has an ROCE of 13%. In absolute terms, that's a satisfactory return, but compared to the Beverage industry average of 10% it's much better.

View our latest analysis for Viña Concha y Toro

Above you can see how the current ROCE for Viña Concha y Toro compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

So How Is Viña Concha y Toro's ROCE Trending?

The trend of ROCE doesn't stand out much, but returns on a whole are decent. Over the past five years, ROCE has remained relatively flat at around 13% and the business has deployed 47% more capital into its operations. 13% is a pretty standard return, and it provides some comfort knowing that Viña Concha y Toro has consistently earned this amount. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

The Bottom Line On Viña Concha y Toro's ROCE

To sum it up, Viña Concha y Toro has simply been reinvesting capital steadily, at those decent rates of return. However, over the last five years, the stock has only delivered a 34% return to shareholders who held over that period. So because of the trends we're seeing, we'd recommend looking further into this stock to see if it has the makings of a multi-bagger.

If you want to continue researching Viña Concha y Toro, you might be interested to know about the 2 warning signs that our analysis has discovered.

While Viña Concha y Toro may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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