We Like Industrias CH S. A. B. de C. V's (BMV:ICHB) Returns And Here's How They're Trending

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out 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. 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.

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

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed 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)

0.26 = Mex$17b ÷ (Mex$75b - Mex$12b) (Based on the trailing twelve months to June 2022).

Therefore, Industrias CH S. A. B. de C. V has an ROCE of 26%. In absolute terms that's a very respectable return and compared to the Metals and Mining industry average of 24% it's pretty much on par.

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

The Trend Of ROCE

Industrias CH S. A. B. de C. V is displaying some positive trends. The data shows that returns on capital have increased substantially over the last five years to 26%. The amount of capital employed has increased too, by 45%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

The Bottom Line

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 staggering 213% to shareholders over the last five years, it looks like investors are recognizing these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

One more thing, we've spotted 1 warning sign facing Industrias CH S. A. B. de C. V that you might find interesting.

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.