Returns Are Gaining Momentum At CEMEX. de (BMV:CEMEXCPO)

By
Simply Wall St
Published
August 14, 2021
BMV:CEMEX CPO
Source: Shutterstock

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, 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. So when we looked at CEMEX. de (BMV:CEMEXCPO) and its trend of ROCE, we really liked what we saw.

What is Return On Capital Employed (ROCE)?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on CEMEX. de is:

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

0.11 = US$2.4b ÷ (US$28b - US$5.8b) (Based on the trailing twelve months to June 2021).

Therefore, CEMEX. de has an ROCE of 11%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Basic Materials industry average of 13%.

Check out our latest analysis for CEMEX. de

roce
BMV:CEMEX CPO Return on Capital Employed August 15th 2021

Above you can see how the current ROCE for CEMEX. 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 CEMEX. de.

So How Is CEMEX. de's ROCE Trending?

CEMEX. de is showing promise given that its ROCE is trending up and to the right. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 81% in that same time. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

What We Can Learn From CEMEX. de's ROCE

To sum it up, CEMEX. de is collecting higher returns from the same amount of capital, and that's impressive. Considering the stock has delivered 8.9% to its stockholders over the last five years, it may be fair to think that investors aren't fully aware of the promising trends yet. So with that in mind, we think the stock deserves further research.

On a final note, we've found 1 warning sign for CEMEX. de that we think you should be aware of.

While CEMEX. de isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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