Returns On Capital At Arca Continental. de (BMV:AC) Have Stalled

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Having said that, from a first glance at Arca Continental. de (BMV:AC) 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?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for Arca Continental. de:

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

0.10 = Mex$21b ÷ (Mex$246b - Mex$31b) (Based on the trailing twelve months to December 2020).

Thus, Arca Continental. de has an ROCE of 10.0%. On its own, that's a low figure but it's around the 11% average generated by the Beverage industry.

View our latest analysis for Arca Continental. de

Above you can see how the current ROCE for Arca Continental. 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 Arca Continental. de.

What The Trend Of ROCE Can Tell Us

There are better returns on capital out there than what we're seeing at Arca Continental. de. The company has consistently earned 10.0% for the last five years, and the capital employed within the business has risen 103% in that time. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.

The Bottom Line

In conclusion, Arca Continental. de has been investing more capital into the business, but returns on that capital haven't increased. Unsurprisingly then, the total return to shareholders over the last five years has been flat. All in all, the inherent trends aren't typical of multi-baggers, so if that's what you're after, we think you might have more luck elsewhere.

On a separate note, we've found 1 warning sign for Arca Continental. de you'll probably want to know about.

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