Compañía Minera Autlán. de (BMV:AUTLANB) Could Be Struggling To Allocate Capital

What financial metrics can indicate to us that a company is maturing or even in decline? More often than not, we'll see a declining return on capital employed (ROCE) and a declining amount of capital employed. Ultimately this means that the company is earning less per dollar invested and on top of that, it's shrinking its base of capital employed. And from a first read, things don't look too good at Compañía Minera Autlán. de (BMV:AUTLANB), so let's see why.

What Is Return On Capital Employed (ROCE)?

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. To calculate this metric for Compañía Minera Autlán. de, this is the formula:

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

0.0028 = US$1.5m ÷ (US$749m - US$221m) (Based on the trailing twelve months to June 2023).

Thus, Compañía Minera Autlán. de has an ROCE of 0.3%. In absolute terms, that's a low return and it also under-performs the Metals and Mining industry average of 16%.

Check out our latest analysis for Compañía Minera Autlán. de

Historical performance is a great place to start when researching a stock so above you can see the gauge for Compañía Minera Autlán. de's ROCE against it's prior returns. If you're interested in investigating Compañía Minera Autlán. de's past further, check out this free graph of past earnings, revenue and cash flow.

How Are Returns Trending?

There is reason to be cautious about Compañía Minera Autlán. de, given the returns are trending downwards. About five years ago, returns on capital were 18%, however they're now substantially lower than that as we saw above. Meanwhile, capital employed in the business has stayed roughly the flat over the period. This combination can be indicative of a mature business that still has areas to deploy capital, but the returns received aren't as high due potentially to new competition or smaller margins. So because these trends aren't typically conducive to creating a multi-bagger, we wouldn't hold our breath on Compañía Minera Autlán. de becoming one if things continue as they have.

In Conclusion...

In summary, it's unfortunate that Compañía Minera Autlán. de is generating lower returns from the same amount of capital. Long term shareholders who've owned the stock over the last five years have experienced a 20% depreciation in their investment, so it appears the market might not like these trends either. With underlying trends that aren't great in these areas, we'd consider looking elsewhere.

Compañía Minera Autlán. de does come with some risks though, we found 2 warning signs in our investment analysis, and 1 of those can't be ignored...

While Compañía Minera Autlán. 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.