What We Make Of Cydsa. de's (BMV:CYDSASAA) Returns On Capital

There are a few key trends to look for if we want to identify the next multi-bagger. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. With that in mind, we've noticed some promising trends at Cydsa. de (BMV:CYDSASAA) so let's look a bit deeper.

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. Analysts use this formula to calculate it for Cydsa. de:

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

0.066 = Mex$1.9b ÷ (Mex$31b - Mex$3.0b) (Based on the trailing twelve months to September 2020).

Thus, Cydsa. de has an ROCE of 6.6%. Ultimately, that's a low return and it under-performs the Chemicals industry average of 9.2%.

Check out our latest analysis for Cydsa. de

In the above chart we have measured Cydsa. de's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Cydsa. de here for free.

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

We're glad to see that ROCE is heading in the right direction, even if it is still low at the moment. The data shows that returns on capital have increased substantially over the last five years to 6.6%. The amount of capital employed has increased too, by 97%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

The Bottom Line On Cydsa. de's ROCE

All in all, it's terrific to see that Cydsa. de is reaping the rewards from prior investments and is growing its capital base. Given the stock has declined 14% in the last five years, this could be a good investment if the valuation and other metrics are also appealing. So researching this company further and determining whether or not these trends will continue seems justified.

Cydsa. de does have some risks though, and we've spotted 1 warning sign for Cydsa. de that you might be interested in.

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This article by Simply Wall St is general in nature. 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.
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