Returns On Capital Are A Standout For Industrias CH S. A. B. de C. V (BMV:ICHB)

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, the ROCE of Industrias CH S. A. B. de C. V (BMV:ICHB) looks great, so lets see what the trend can tell us.

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)

0.24 = Mex$13b ÷ (Mex$66b - Mex$11b) (Based on the trailing twelve months to September 2021).

So, Industrias CH S. A. B. de C. V has an ROCE of 24%. In absolute terms that's a very respectable return and compared to the Metals and Mining industry average of 25% it's pretty much on par.

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

Above you can see how the current ROCE for Industrias CH S. A. B. de C. V 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 Does the ROCE Trend For Industrias CH S. A. B. de C. V Tell Us?

The trends we've noticed at Industrias CH S. A. B. de C. V are quite reassuring. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 24%. Basically the business is earning more per dollar of capital invested and in addition to that, 37% more capital is being employed now too. 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

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. Since the stock has returned a solid 61% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

One more thing: We've identified 2 warning signs with Industrias CH S. A. B. de C. V (at least 1 which doesn't sit too well with us) , and understanding these would certainly be useful.

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