Did you know there are some financial metrics that can provide clues of a potential 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So when we looked at GCC. de (BMV:GCC) and its trend of ROCE, we really liked what we saw.
What Is 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 GCC. de is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.15 = US$397m ÷ (US$3.0b - US$327m) (Based on the trailing twelve months to September 2024).
Therefore, GCC. de has an ROCE of 15%. In absolute terms, that's a satisfactory return, but compared to the Basic Materials industry average of 9.6% it's much better.
See our latest analysis for GCC. de
In the above chart we have measured GCC. de's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for GCC. de .
What Can We Tell From GCC. de's ROCE Trend?
GCC. de is displaying some positive trends. The data shows that returns on capital have increased substantially over the last five years to 15%. Basically the business is earning more per dollar of capital invested and in addition to that, 44% more capital is being employed now too. So we're very much inspired by what we're seeing at GCC. de thanks to its ability to profitably reinvest capital.
In Conclusion...
A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what GCC. de has. And with a respectable 91% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.
One more thing, we've spotted 1 warning sign facing GCC. de that you might find interesting.
If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.
About BMV:GCC *
GCC. de
Through its subsidiaries, produces, distributes, and sells gray Portland cement, ready-mix concrete, aggregates, and other building construction materials in Mexico and the United States.
Flawless balance sheet and undervalued.
