The Trend Of High Returns At Industrias CH S. A. B. de C. V (BMV:ICHB) Has Us Very Interested

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So when we looked at the ROCE trend of Industrias CH S. A. B. de C. V (BMV:ICHB) we really liked what we saw.

Understanding Return On Capital Employed (ROCE)

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)

0.25 = Mex$15b ÷ (Mex$76b - Mex$13b) (Based on the trailing twelve months to September 2022).

So, Industrias CH S. A. B. de C. V has an ROCE of 25%. In absolute terms that's a great return and it's even better than the Metals and Mining industry average of 14%.

See 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 report for Industrias CH S. A. B. de C. V.

How Are Returns Trending?

The trends we've noticed at Industrias CH S. A. B. de C. V are quite reassuring. Over the last five years, returns on capital employed have risen substantially to 25%. The amount of capital employed has increased too, by 42%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

In Conclusion...

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. Since the stock has returned a staggering 155% to shareholders over the last five years, it looks like investors are recognizing these changes. 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.

If you'd like to know about the risks facing Industrias CH S. A. B. de C. V, we've discovered 1 warning sign that you should be aware of.

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.