Convertidora Industrial. de (BMV:CONVERA) Will Be Looking To Turn Around Its Returns

If you're looking at a mature business that's past the growth phase, what are some of the underlying trends that pop up? Typically, we'll see the trend of both return on capital employed (ROCE) declining and this usually coincides with a decreasing amount of capital employed. This indicates the company is producing less profit from its investments and its total assets are decreasing. So after we looked into Convertidora Industrial. de (BMV:CONVERA), the trends above didn't look too great.

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. To calculate this metric for Convertidora Industrial. de, this is the formula:

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

0.069 = Mex$87m ÷ (Mex$2.0b - Mex$782m) (Based on the trailing twelve months to March 2024).

Thus, Convertidora Industrial. de has an ROCE of 6.9%. In absolute terms, that's a low return and it also under-performs the Packaging industry average of 9.3%.

See our latest analysis for Convertidora Industrial. de

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

What Does the ROCE Trend For Convertidora Industrial. de Tell Us?

In terms of Convertidora Industrial. de's historical ROCE movements, the trend doesn't inspire confidence. About five years ago, returns on capital were 10%, however they're now substantially lower than that as we saw above. On top of that, it's worth noting that the amount of capital employed within the business has remained relatively steady. Since returns are falling and the business has the same amount of assets employed, this can suggest it's a mature business that hasn't had much growth in the last five years. So because these trends aren't typically conducive to creating a multi-bagger, we wouldn't hold our breath on Convertidora Industrial. de becoming one if things continue as they have.

The Key Takeaway

In summary, it's unfortunate that Convertidora Industrial. de is generating lower returns from the same amount of capital. Long term shareholders who've owned the stock over the last three years have experienced a 44% depreciation in their investment, so it appears the market might not like these trends either. That being the case, unless the underlying trends revert to a more positive trajectory, we'd consider looking elsewhere.

Like most companies, Convertidora Industrial. de does come with some risks, and we've found 4 warning signs that you should be aware of.

While Convertidora Industrial. 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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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.