Impulsora del Desarrollo y el Empleo en América Latina. de (BMV:IDEALB-1) Might Have The Makings Of A Multi-Bagger

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So on that note, Impulsora del Desarrollo y el Empleo en América Latina. de (BMV:IDEALB-1) looks quite promising in regards to its trends of return on capital.

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. The formula for this calculation on Impulsora del Desarrollo y el Empleo en América Latina. de is:

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

0.10 = Mex$11b ÷ (Mex$120b - Mex$16b) (Based on the trailing twelve months to June 2022).

So, Impulsora del Desarrollo y el Empleo en América Latina. de has an ROCE of 10%. In absolute terms, that's a satisfactory return, but compared to the Construction industry average of 5.0% it's much better.

Our analysis indicates that IDEAL B-1 is potentially overvalued!

Historical performance is a great place to start when researching a stock so above you can see the gauge for Impulsora del Desarrollo y el Empleo en América Latina. de's ROCE against it's prior returns. If you're interested in investigating Impulsora del Desarrollo y el Empleo en América Latina. de's past further, check out this free graph of past earnings, revenue and cash flow.

The Trend Of ROCE

Impulsora del Desarrollo y el Empleo en América Latina. de's ROCE growth is quite impressive. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 56% over the last five years. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. It's worth looking deeper into this though because while it's great that the business is more efficient, it might also mean that going forward the areas to invest internally for the organic growth are lacking.

Our Take On Impulsora del Desarrollo y el Empleo en América Latina. de's ROCE

As discussed above, Impulsora del Desarrollo y el Empleo en América Latina. de appears to be getting more proficient at generating returns since capital employed has remained flat but earnings (before interest and tax) are up. Investors may not be impressed by the favorable underlying trends yet because over the last five years the stock has only returned 17% to shareholders. Given that, we'd look further into this stock in case it has more traits that could make it multiply in the long term.

If you'd like to know more about Impulsora del Desarrollo y el Empleo en América Latina. de, we've spotted 4 warning signs, and 2 of them can't be ignored.

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.