Industrias CH S. A. B. de C. V (BMV:ICHB) Is Very Good At Capital Allocation

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Speaking of which, we noticed some great changes in Industrias CH S. A. B. de C. V's (BMV:ICHB) returns on capital, so let's have a look.

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

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 Industrias CH S. A. B. de C. V is:

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

0.28 = Mex$16b ÷ (Mex$71b - Mex$13b) (Based on the trailing twelve months to March 2022).

Therefore, Industrias CH S. A. B. de C. V has an ROCE of 28%. On its own, that's a very good return and it's on par with the returns earned by companies in a similar industry.

View our latest analysis for Industrias CH S. A. B. de C. V

In the above chart we have measured Industrias CH S. A. B. de C. V'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 report on analyst forecasts for the company.

What Can We Tell From Industrias CH S. A. B. de C. V's ROCE Trend?

Industrias CH S. A. B. de C. V is displaying some positive trends. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 28%. The amount of capital employed has increased too, by 35%. So we're very much inspired by what we're seeing at Industrias CH S. A. B. de C. V thanks to its ability to profitably reinvest capital.

What We Can Learn From Industrias CH S. A. B. de C. V's ROCE

To sum it up, Industrias CH S. A. B. de C. V has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. In light of that, we think it's worth looking further into this stock because if Industrias CH S. A. B. de C. V can keep these trends up, it could have a bright future ahead.

While Industrias CH S. A. B. de C. V looks impressive, no company is worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether ICH B is currently trading for a fair price.

High returns are a key ingredient to strong performance, so check out our free list ofstocks earning high returns on equity with solid balance sheets.

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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.