Industrias CH S. A. B. de C. V's (BMV:ICHB) Returns On Capital Are Heading Higher

There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, 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 Industrias CH S. A. B. de C. V (BMV:ICHB) so let's look a bit deeper.

What Is Return On Capital Employed (ROCE)?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for Industrias CH S. A. B. de C. V:

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

0.18 = Mex$11b ÷ (Mex$76b - Mex$12b) (Based on the trailing twelve months to June 2023).

So, Industrias CH S. A. B. de C. V has an ROCE of 18%. That's a relatively normal return on capital, and it's around the 16% generated by the Metals and Mining industry.

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

Historical performance is a great place to start when researching a stock so above you can see the gauge for Industrias CH S. A. B. de C. V's ROCE against it's prior returns. If you'd like to look at how Industrias CH S. A. B. de C. V has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

The Trend Of ROCE

We like the trends that we're seeing from Industrias CH S. A. B. de C. V. 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 32%. 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.

Our Take On Industrias CH S. A. B. de C. V's ROCE

In summary, it's great to see that Industrias CH S. A. B. de C. V 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. And a remarkable 169% total return over the last five years tells us that investors are expecting more good things to come in the future. 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.

On a final note, we've found 1 warning sign for Industrias CH S. A. B. de C. V that we think you should be aware of.

While Industrias CH S. A. B. de C. V 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.