Returns At Clínica Las Condes (SNSE:LAS CONDES) Are On The Way Up

What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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 when we looked at Clínica Las Condes (SNSE:LAS CONDES) and its trend of ROCE, we really liked what we saw.

Understanding Return On Capital Employed (ROCE)

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for Clínica Las Condes:

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

0.03 = CL$14b ÷ (CL$564b - CL$84b) (Based on the trailing twelve months to June 2023).

So, Clínica Las Condes has an ROCE of 3.0%. In absolute terms, that's a low return and it also under-performs the Healthcare industry average of 10.0%.

Check out our latest analysis for Clínica Las Condes

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're interested in investigating Clínica Las Condes' past further, check out this free graph of past earnings, revenue and cash flow.

What The Trend Of ROCE Can Tell Us

Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. The data shows that returns on capital have increased substantially over the last five years to 3.0%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 39%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

What We Can Learn From Clínica Las Condes' ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Clínica Las Condes has. Astute investors may have an opportunity here because the stock has declined 48% in the last five years. So researching this company further and determining whether or not these trends will continue seems justified.

Like most companies, Clínica Las Condes does come with some risks, and we've found 2 warning signs that you should be aware of.

While Clínica Las Condes 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.