Slowing Rates Of Return At Grupo Carso. de (BMV:GCARSOA1) Leave Little Room For Excitement

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's 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, when we ran our eye over Grupo Carso. de's (BMV:GCARSOA1) trend of ROCE, we liked what we saw.

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

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. 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)

0.12 = Mex$22b ÷ (Mex$241b - Mex$62b) (Based on the trailing twelve months to December 2022).

Thus, Grupo Carso. de has an ROCE of 12%. On its own, that's a standard return, however it's much better than the 9.4% generated by the Industrials industry.

View our latest analysis for Grupo Carso. de

Historical performance is a great place to start when researching a stock so above you can see the gauge for Grupo Carso. de's ROCE against it's prior returns. If you'd like to look at how Grupo Carso. de has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

The Trend Of ROCE

While the current returns on capital are decent, they haven't changed much. Over the past five years, ROCE has remained relatively flat at around 12% and the business has deployed 84% more capital into its operations. 12% is a pretty standard return, and it provides some comfort knowing that Grupo Carso. de 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.

In Conclusion...

In the end, Grupo Carso. de has proven its ability to adequately reinvest capital at good rates of return. And since the stock has risen strongly over the last five years, it appears the market might expect this trend to continue. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

On a separate note, we've found 1 warning sign for Grupo Carso. de you'll probably want to know about.

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.