Returns On Capital Signal Tricky Times Ahead For Vinte Viviendas Integrales. de (BMV:VINTE)

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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. However, after briefly looking over the numbers, we don't think Vinte Viviendas Integrales. de (BMV:VINTE) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

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. To calculate this metric for Vinte Viviendas Integrales. de, this is the formula:

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

0.058 = Mex$594m ÷ (Mex$12b - Mex$1.9b) (Based on the trailing twelve months to June 2024).

Thus, Vinte Viviendas Integrales. de has an ROCE of 5.8%. In absolute terms, that's a low return but it's around the Consumer Durables industry average of 6.5%.

See our latest analysis for Vinte Viviendas Integrales. de

Above you can see how the current ROCE for Vinte Viviendas Integrales. 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 Vinte Viviendas Integrales. de for free.

What Can We Tell From Vinte Viviendas Integrales. de's ROCE Trend?

When we looked at the ROCE trend at Vinte Viviendas Integrales. de, we didn't gain much confidence. Over the last five years, returns on capital have decreased to 5.8% from 11% five years ago. On the other hand, the company has been employing more capital without a corresponding improvement in sales in the last year, which could suggest these investments are longer term plays. It's worth keeping an eye on the company's earnings from here on to see if these investments do end up contributing to the bottom line.

The Key Takeaway

Bringing it all together, while we're somewhat encouraged by Vinte Viviendas Integrales. de's reinvestment in its own business, we're aware that returns are shrinking. And with the stock having returned a mere 31% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. So if you're looking for a multi-bagger, the underlying trends indicate you may have better chances elsewhere.

If you want to know some of the risks facing Vinte Viviendas Integrales. de we've found 3 warning signs (1 is potentially serious!) that you should be aware of before investing here.

While Vinte Viviendas Integrales. de may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.