Returns Are Gaining Momentum At Industrias CH S. A. B. de C. V (BMV:ICHB)

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So when we looked at Industrias CH S. A. B. de C. V (BMV:ICHB) and its trend of ROCE, we really liked what we saw.

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. To calculate this metric for Industrias CH S. A. B. de C. V, this is the formula:

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

0.16 = Mex$10b ÷ (Mex$77b - Mex$12b) (Based on the trailing twelve months to September 2023).

Thus, Industrias CH S. A. B. de C. V has an ROCE of 16%. On its own, that's a standard return, however it's much better than the 12% generated by the Metals and Mining industry.

See 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.

So How Is Industrias CH S. A. B. de C. V's ROCE Trending?

Investors would be pleased with what's happening at Industrias CH S. A. B. de C. V. Over the last five years, returns on capital employed have risen substantially to 16%. 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 36%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

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

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 Industrias CH S. A. B. de C. V has. And a remarkable 142% total return over the last five years tells us that investors are expecting more good things to come in the future. 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 Industrias CH S. A. B. de C. V you'll probably want to know about.

While Industrias CH S. A. B. de C. V isn't earning the highest return, check out this free list of companies that are 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.