Shareholders Would Enjoy A Repeat Of Grupo México. de's (BMV:GMEXICOB) Recent Growth In Returns

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. And in light of that, the trends we're seeing at Grupo México. de's (BMV:GMEXICOB) look very promising so lets take a look.

Return On Capital Employed (ROCE): What is it?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Grupo México. de:

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

0.27 = US$7.8b ÷ (US$32b - US$3.1b) (Based on the trailing twelve months to December 2021).

Thus, Grupo México. de has an ROCE of 27%. On its own that's a fantastic return on capital, though it's the same as the Metals and Mining industry average of 27%.

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'd like, you can check out the forecasts from the analysts covering Grupo México. de here for free.

What The Trend Of ROCE Can Tell Us

The trends we've noticed at Grupo México. de are quite reassuring. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 27%. The amount of capital employed has increased too, by 39%. 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

In summary, it's great to see that Grupo México. de can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. Since the stock has returned a staggering 161% to shareholders over the last five years, it looks like investors are recognizing 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.

One final note, you should learn about the 2 warning signs we've spotted with Grupo México. de (including 1 which shouldn't be ignored) .

Grupo México. de is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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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.