Returns At Convertidora Industrial. de (BMV:CONVERA) Appear To Be Weighed Down

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. However, after investigating Convertidora Industrial. de (BMV:CONVERA), we don't think it's current trends fit the mold of a multi-bagger.

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Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Convertidora Industrial. de is:

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

0.093 = Mex$109m ÷ (Mex$2.2b - Mex$1.0b) (Based on the trailing twelve months to December 2024).

Thus, Convertidora Industrial. de has an ROCE of 9.3%. In absolute terms, that's a low return but it's around the Packaging industry average of 8.3%.

See our latest analysis for Convertidora Industrial. 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'd like to look at how Convertidora Industrial. de has performed in the past in other metrics, you can view this free graph of Convertidora Industrial. de's past earnings, revenue and cash flow .

What Can We Tell From Convertidora Industrial. de's ROCE Trend?

Over the past five years, Convertidora Industrial. de's ROCE and capital employed have both remained mostly flat. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. So don't be surprised if Convertidora Industrial. de doesn't end up being a multi-bagger in a few years time.

Another thing to note, Convertidora Industrial. de has a high ratio of current liabilities to total assets of 46%. This effectively means that suppliers (or short-term creditors) are funding a large portion of the business, so just be aware that this can introduce some elements of risk. While it's not necessarily a bad thing, it can be beneficial if this ratio is lower.

The Bottom Line

In a nutshell, Convertidora Industrial. de has been trudging along with the same returns from the same amount of capital over the last five years. Since the stock has declined 61% over the last five years, investors may not be too optimistic on this trend improving either. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere.

If you want to continue researching Convertidora Industrial. de, you might be interested to know about the 4 warning signs that our analysis has discovered.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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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.