Vinte Viviendas Integrales. de (BMV:VINTE) Is Reinvesting At Lower Rates Of Return

If you're looking for a multi-bagger, there's a few things to keep an eye out for. 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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Having said that, from a first glance at Vinte Viviendas Integrales. de (BMV:VINTE) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

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

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Vinte Viviendas Integrales. de:

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

0.057 = Mex$457m ÷ (Mex$9.3b - Mex$1.2b) (Based on the trailing twelve months to December 2020).

So, Vinte Viviendas Integrales. de has an ROCE of 5.7%. On its own that's a low return on capital but it's in line with the industry's average returns of 5.7%.

See our latest analysis for Vinte Viviendas Integrales. de

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you want to delve into the historical earnings, revenue and cash flow of Vinte Viviendas Integrales. de, check out these free graphs here.

What Does the ROCE Trend For Vinte Viviendas Integrales. de Tell Us?

When we looked at the ROCE trend at Vinte Viviendas Integrales. de, we didn't gain much confidence. Around five years ago the returns on capital were 18%, but since then they've fallen to 5.7%. However it looks like Vinte Viviendas Integrales. 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'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

To conclude, we've found that Vinte Viviendas Integrales. de is reinvesting in the business, but returns have been falling. Unsurprisingly, the stock has only gained 22% over the last three years, which potentially indicates that investors are accounting for this going forward. As a result, if you're hunting for a multi-bagger, we think you'd have more luck elsewhere.

One more thing: We've identified 4 warning signs with Vinte Viviendas Integrales. de (at least 1 which is potentially serious) , and understanding these would certainly be useful.

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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