If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So on that note, Grupo Carso. de (BMV:GCARSOA1) looks quite promising in regards to its trends of return on capital.
Return On Capital Employed (ROCE): What Is It?
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 Grupo Carso. de:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.14 = Mex$24b ÷ (Mex$240b - Mex$65b) (Based on the trailing twelve months to March 2023).
So, Grupo Carso. de has an ROCE of 14%. On its own, that's a standard return, however it's much better than the 9.6% generated by the Industrials industry.
Check out our latest analysis for Grupo Carso. de
Above you can see how the current ROCE for Grupo Carso. de 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 Grupo Carso. de here for free.
The Trend Of ROCE
Investors would be pleased with what's happening at Grupo Carso. de. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 14%. The amount of capital employed has increased too, by 83%. So we're very much inspired by what we're seeing at Grupo Carso. de thanks to its ability to profitably reinvest capital.
In Conclusion...
All in all, it's terrific to see that Grupo Carso. de is reaping the rewards from prior investments and is growing its capital base. And with a respectable 93% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. Therefore, we think it would be worth your time to check if these trends are going to continue.
On the other side of ROCE, we have to consider valuation. That's why we have a FREE intrinsic value estimation on our platform that is definitely worth checking out.
While Grupo Carso. de 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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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.
About BMV:GCARSO A1
Grupo Carso. de
Engages in the commercial, industrial, infrastructure and construction, and energy sectors.
Excellent balance sheet with limited growth.
