The Return Trends At Grupo Cementos de Chihuahua. de (BMV:GCC) Look Promising

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. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So on that note, Grupo Cementos de Chihuahua. de (BMV:GCC) looks quite promising in regards to its trends of return on capital.

Understanding 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. To calculate this metric for Grupo Cementos de Chihuahua. de, this is the formula:

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

0.13 = US$250m ÷ (US$2.2b - US$358m) (Based on the trailing twelve months to September 2021).

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

Check out our latest analysis for Grupo Cementos de Chihuahua. de

Above you can see how the current ROCE for Grupo Cementos de Chihuahua. 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 Grupo Cementos de Chihuahua. de.

So How Is Grupo Cementos de Chihuahua. de's ROCE Trending?

The trends we've noticed at Grupo Cementos de Chihuahua. de are quite reassuring. Over the last five years, returns on capital employed have risen substantially to 13%. The amount of capital employed has increased too, by 31%. So we're very much inspired by what we're seeing at Grupo Cementos de Chihuahua. de thanks to its ability to profitably reinvest capital.

The Key Takeaway

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 Grupo Cementos de Chihuahua. de has. Since the stock has returned a staggering 164% to shareholders over the last five years, it looks like investors are recognizing these changes. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

On a separate note, we've found 1 warning sign for Grupo Cementos de Chihuahua. de you'll probably want to know about.

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.

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.

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