Here's What To Make Of Sociedad Agrícola La Rosa Sofruco's (SNSE:SOFRUCO) Returns On Capital

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, the ROCE of Sociedad Agrícola La Rosa Sofruco (SNSE:SOFRUCO) looks decent, right now, so lets see what the trend of returns can tell us.

Understanding 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. Analysts use this formula to calculate it for Sociedad Agrícola La Rosa Sofruco:

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

0.11 = CL$6.7b ÷ (CL$89b - CL$27b) (Based on the trailing twelve months to June 2020).

Therefore, Sociedad Agrícola La Rosa Sofruco has an ROCE of 11%. On its own, that's a standard return, however it's much better than the 8.2% generated by the Food industry.

Check out our latest analysis for Sociedad Agrícola La Rosa Sofruco

Historical performance is a great place to start when researching a stock so above you can see the gauge for Sociedad Agrícola La Rosa Sofruco's ROCE against it's prior returns. If you're interested in investigating Sociedad Agrícola La Rosa Sofruco's past further, check out this free graph of past earnings, revenue and cash flow.

How Are Returns Trending?

While the returns on capital are good, they haven't moved much. The company has employed 20% more capital in the last five years, and the returns on that capital have remained stable at 11%. 11% is a pretty standard return, and it provides some comfort knowing that Sociedad Agrícola La Rosa Sofruco 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 Key Takeaway

To sum it up, Sociedad Agrícola La Rosa Sofruco has simply been reinvesting capital steadily, at those decent rates of return. Therefore it's no surprise that shareholders have earned a respectable 82% return if they held over the last five years. So even though the stock might be more "expensive" than it was before, we think the strong fundamentals warrant this stock for further research.

If you want to know some of the risks facing Sociedad Agrícola La Rosa Sofruco we've found 3 warning signs (1 is significant!) that you should be aware of before investing here.

While Sociedad Agrícola La Rosa Sofruco 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. 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.
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