If you're looking for a multi-bagger, there's a few things to keep an eye out for. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, we've noticed some promising trends at Grupo México. de (BMV:GMEXICOB) so let's look a bit deeper.
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. The formula for this calculation on Grupo México. de is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.18 = US$5.8b ÷ (US$34b - US$2.0b) (Based on the trailing twelve months to March 2023).
So, Grupo México. de has an ROCE of 18%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Metals and Mining industry average of 16%.
Check out our latest analysis for Grupo México. de
Above you can see how the current ROCE for Grupo México. de compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.
What The Trend Of ROCE Can Tell Us
We like the trends that we're seeing from Grupo México. de. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 18%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 27%. So we're very much inspired by what we're seeing at Grupo México. de thanks to its ability to profitably reinvest capital.
Our Take On Grupo México. de's ROCE
To sum it up, Grupo México. de has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Since the stock has returned a solid 97% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. In light of that, we think it's worth looking further into this stock because if Grupo México. de can keep these trends up, it could have a bright future ahead.
On a final note, we've found 2 warning signs for Grupo México. de that we think you should be aware of.
While Grupo México. de may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.
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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:GMEXICO B
Grupo México. de
Engages in copper production, cargo transportation, and infrastructure businesses worldwide.
Flawless balance sheet average dividend payer.
