Grupo Lamosa. de (BMV:LAMOSA) Knows How To Allocate Capital Effectively

There are a few key trends to look for if we want to identify the next multi-bagger. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, the ROCE of Grupo Lamosa. de (BMV:LAMOSA) looks great, so lets see what the trend can tell us.

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 Lamosa. de:

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

0.26 = Mex$6.2b ÷ (Mex$31b - Mex$7.0b) (Based on the trailing twelve months to September 2021).

Therefore, Grupo Lamosa. de has an ROCE of 26%. That's a fantastic return and not only that, it outpaces the average of 15% earned by companies in a similar industry.

Check out our latest analysis for Grupo Lamosa. de

Above you can see how the current ROCE for Grupo Lamosa. 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 Lamosa. de here for free.

What Does the ROCE Trend For Grupo Lamosa. de Tell Us?

Grupo Lamosa. de is displaying some positive trends. The data shows that returns on capital have increased substantially over the last five years to 26%. Basically the business is earning more per dollar of capital invested and in addition to that, 27% more capital is being employed now too. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

Our Take On Grupo Lamosa. de's ROCE

In summary, it's great to see that Grupo Lamosa. de can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. Since the stock has returned a staggering 173% to shareholders over the last five years, it looks like investors are recognizing these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

One more thing, we've spotted 2 warning signs facing Grupo Lamosa. de that you might find interesting.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.

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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