Returns On Capital At Industrias CH S. A. B. de C. V (BMV:ICHB) Have Hit The Brakes

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Although, when we looked at Industrias CH S. A. B. de C. V (BMV:ICHB), it didn't seem to tick all of these boxes.

Return On Capital Employed (ROCE): What Is It?

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. 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)

0.087 = Mex$6.4b ÷ (Mex$84b - Mex$10b) (Based on the trailing twelve months to September 2024).

So, Industrias CH S. A. B. de C. V has an ROCE of 8.7%. Ultimately, that's a low return and it under-performs the Metals and Mining industry average of 13%.

Check out 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'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Industrias CH S. A. B. de C. V .

The Trend Of ROCE

The returns on capital haven't changed much for Industrias CH S. A. B. de C. V in recent years. The company has employed 51% more capital in the last five years, and the returns on that capital have remained stable at 8.7%. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.

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

In conclusion, Industrias CH S. A. B. de C. V has been investing more capital into the business, but returns on that capital haven't increased. Although the market must be expecting these trends to improve because the stock has gained 98% over the last five years. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.

Industrias CH S. A. B. de C. V could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation for ICH B on our platform quite valuable.

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.