What Do The Returns On Capital At Corpovael. de (BMV:CADUA) Tell Us?

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? 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. In light of that, when we looked at Corpovael. de (BMV:CADUA) and its ROCE trend, we weren't exactly thrilled.

Return On Capital Employed (ROCE): What is it?

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 Corpovael. de:

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

0.032 = Mex$269m ÷ (Mex$10b - Mex$1.8b) (Based on the trailing twelve months to September 2020).

So, Corpovael. de has an ROCE of 3.2%. In absolute terms, that's a low return and it also under-performs the Consumer Durables industry average of 9.0%.

Check out our latest analysis for Corpovael. de

Above you can see how the current ROCE for Corpovael. de compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Corpovael. de.

What Can We Tell From Corpovael. de's ROCE Trend?

When we looked at the ROCE trend at Corpovael. de, we didn't gain much confidence. To be more specific, ROCE has fallen from 20% over the last five years. And considering revenue has dropped while employing more capital, we'd be cautious. If this were to continue, you might be looking at a company that is trying to reinvest for growth but is actually losing market share since sales haven't increased.

The Key Takeaway

In summary, we're somewhat concerned by Corpovael. de's diminishing returns on increasing amounts of capital. Investors haven't taken kindly to these developments, since the stock has declined 61% from where it was five years ago. With underlying trends that aren't great in these areas, we'd consider looking elsewhere.

On a final note, we found 3 warning signs for Corpovael. de (1 is potentially serious) you should be aware of.

While Corpovael. 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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