Grupo Lamosa. de (BMV:LAMOSA) Will Be Hoping To Turn Its Returns On Capital Around

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Although, when we looked at Grupo Lamosa. de (BMV:LAMOSA), it didn't seem to tick all of these boxes.

What Is 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. 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)

0.11 = Mex$4.4b ÷ (Mex$48b - Mex$9.2b) (Based on the trailing twelve months to September 2024).

So, Grupo Lamosa. de has an ROCE of 11%. That's a relatively normal return on capital, and it's around the 10% generated by the Building industry.

View 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're interested, you can view the analysts predictions in our free analyst report for Grupo Lamosa. de .

How Are Returns Trending?

When we looked at the ROCE trend at Grupo Lamosa. de, we didn't gain much confidence. Around five years ago the returns on capital were 15%, but since then they've fallen to 11%. However it looks like Grupo Lamosa. de might be reinvesting for long term growth because while capital employed has increased, the company's sales haven't changed much in the last 12 months. It may take some time before the company starts to see any change in earnings from these investments.

The Key Takeaway

To conclude, we've found that Grupo Lamosa. de is reinvesting in the business, but returns have been falling. Investors must think there's better things to come because the stock has knocked it out of the park, delivering a 322% gain to shareholders who have held over the last five years. Ultimately, if the underlying trends persist, we wouldn't hold our breath on it being a multi-bagger going forward.

Grupo Lamosa. de does have some risks, we noticed 2 warning signs (and 1 which is a bit concerning) we think you should know about.

While Grupo Lamosa. 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.