Stock Analysis

Minera Frisco. de (BMV:MFRISCOA-1) Is Looking To Continue Growing Its Returns On Capital

BMV:MFRISCO A-1
Source: Shutterstock

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's 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, we've noticed some promising trends at Minera Frisco. de (BMV:MFRISCOA-1) so let's look a bit deeper.

Understanding Return On Capital Employed (ROCE)

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. Analysts use this formula to calculate it for Minera Frisco. de:

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

0.077 = Mex$1.6b ÷ (Mex$33b - Mex$11b) (Based on the trailing twelve months to September 2024).

Therefore, Minera Frisco. de has an ROCE of 7.7%. In absolute terms, that's a low return and it also under-performs the Metals and Mining industry average of 11%.

See our latest analysis for Minera Frisco. de

roce
BMV:MFRISCO A-1 Return on Capital Employed December 4th 2024

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how Minera Frisco. de has performed in the past in other metrics, you can view this free graph of Minera Frisco. de's past earnings, revenue and cash flow.

The Trend Of ROCE

It's great to see that Minera Frisco. de has started to generate some pre-tax earnings from prior investments. Historically the company was generating losses but as we can see from the latest figures referenced above, they're now earning 7.7% on their capital employed. At first glance, it seems the business is getting more proficient at generating returns, because over the same period, the amount of capital employed has reduced by 28%. This could potentially mean that the company is selling some of its assets.

What We Can Learn From Minera Frisco. de's ROCE

In a nutshell, we're pleased to see that Minera Frisco. de has been able to generate higher returns from less capital. Since the stock has only returned 12% to shareholders over the last five years, the promising fundamentals may not be recognized yet by investors. Given that, we'd look further into this stock in case it has more traits that could make it multiply in the long term.

One more thing to note, we've identified 1 warning sign with Minera Frisco. de and understanding it should be part of your investment process.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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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.