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

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

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.

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