Returns At Aena S.M.E (BME:AENA) Appear To Be Weighed Down

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing 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. However, after investigating Aena S.M.E (BME:AENA), we don't think it's current trends fit the mold of a multi-bagger.

Return On Capital Employed (ROCE): What Is It?

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 Aena S.M.E:

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

0.13 = €1.9b ÷ (€17b - €2.2b) (Based on the trailing twelve months to September 2023).

Thus, Aena S.M.E has an ROCE of 13%. In absolute terms, that's a satisfactory return, but compared to the Infrastructure industry average of 9.8% it's much better.

Check out our latest analysis for Aena S.M.E

Above you can see how the current ROCE for Aena S.M.E compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Aena S.M.E here for free.

How Are Returns Trending?

Over the past five years, Aena S.M.E's ROCE and capital employed have both remained mostly flat. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. So unless we see a substantial change at Aena S.M.E in terms of ROCE and additional investments being made, we wouldn't hold our breath on it being a multi-bagger. On top of that you'll notice that Aena S.M.E has been paying out a large portion (80%) of earnings in the form of dividends to shareholders. Most shareholders probably know this and own the stock for its dividend.

The Key Takeaway

In a nutshell, Aena S.M.E has been trudging along with the same returns from the same amount of capital over the last five years. And with the stock having returned a mere 23% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. Therefore, if you're looking for a multi-bagger, we'd propose looking at other options.

On a separate note, we've found 2 warning signs for Aena S.M.E you'll probably want to 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.

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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.