What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding 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, we've noticed some promising trends at Grupo Carso. de (BMV:GCARSOA1) so let's look a bit deeper.
Understanding 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 Grupo Carso. de, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.13 = Mex$24b ÷ (Mex$247b - Mex$58b) (Based on the trailing twelve months to March 2024).
Thus, Grupo Carso. de has an ROCE of 13%. In absolute terms, that's a satisfactory return, but compared to the Industrials industry average of 7.5% it's much better.
View 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're interested, you can view the analysts predictions in our free analyst report for Grupo Carso. de .
So How Is Grupo Carso. de's ROCE Trending?
The trends we've noticed at Grupo Carso. de are quite reassuring. The data shows that returns on capital have increased substantially over the last five years to 13%. Basically the business is earning more per dollar of capital invested and in addition to that, 59% more capital is being employed now too. So we're very much inspired by what we're seeing at Grupo Carso. de thanks to its ability to profitably reinvest capital.
The Key Takeaway
To sum it up, Grupo Carso. de has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Since the stock has returned a solid 97% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. In light of that, we think it's worth looking further into this stock because if Grupo Carso. de can keep these trends up, it could have a bright future ahead.
Grupo Carso. de does come with some risks though, we found 2 warning signs in our investment analysis, and 1 of those shouldn't be ignored...
While Grupo Carso. de 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.
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About BMV:GCARSO A1
Grupo Carso. de
Engages in the commercial, industrial, infrastructure and construction, and energy sectors.
Excellent balance sheet with limited growth.
