Stock Analysis

Returns On Capital At Grupo Minsa. de (BMV:MINSAB) Have Hit The Brakes

BMV:MINSA B
Source: Shutterstock

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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. In light of that, when we looked at Grupo Minsa. de (BMV:MINSAB) 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. The formula for this calculation on Grupo Minsa. de is:

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

0.076 = Mex$230m ÷ (Mex$3.9b - Mex$901m) (Based on the trailing twelve months to December 2020).

Therefore, Grupo Minsa. de has an ROCE of 7.6%. Ultimately, that's a low return and it under-performs the Food industry average of 10%.

View our latest analysis for Grupo Minsa. de

roce
BMV:MINSA B Return on Capital Employed March 24th 2021

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 Grupo Minsa. de, check out these free graphs here.

What Does the ROCE Trend For Grupo Minsa. de Tell Us?

There hasn't been much to report for Grupo Minsa. de's returns and its level of capital employed because both metrics have been steady for the past five years. It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. So unless we see a substantial change at Grupo Minsa. de in terms of ROCE and additional investments being made, we wouldn't hold our breath on it being a multi-bagger.

Our Take On Grupo Minsa. de's ROCE

We can conclude that in regards to Grupo Minsa. de's returns on capital employed and the trends, there isn't much change to report on. And with the stock having returned a mere 30% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. Therefore, if you're looking for a multi-bagger, we'd propose looking at other options.

Grupo Minsa. de could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation on our platform quite valuable.

While Grupo Minsa. 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.

When trading Grupo Minsa. de or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted


New: Manage All Your Stock Portfolios in One Place

We've created the ultimate portfolio companion for stock investors, and it's free.

• Connect an unlimited number of Portfolios and see your total in one currency
• Be alerted to new Warning Signs or Risks via email or mobile
• Track the Fair Value of your stocks

Try a Demo Portfolio for Free

This article by Simply Wall St is general in nature. 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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020


Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.