Investors Shouldn't Overlook TV Azteca. de's (BMV:AZTECACPO) Impressive Returns On Capital

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So when we looked at the ROCE trend of TV Azteca. de (BMV:AZTECACPO) we really liked what we saw.

Return On Capital Employed (ROCE): What is it?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on TV Azteca. de is:

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

0.23 = Mex$3.0b ÷ (Mex$28b - Mex$16b) (Based on the trailing twelve months to December 2021).

Therefore, TV Azteca. de has an ROCE of 23%. In absolute terms that's a great return and it's even better than the Media industry average of 13%.

See our latest analysis for TV Azteca. de

Historical performance is a great place to start when researching a stock so above you can see the gauge for TV Azteca. de's ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of TV Azteca. de, check out these free graphs here.

So How Is TV Azteca. de's ROCE Trending?

TV Azteca. de has not disappointed in regards to ROCE growth. We found that the returns on capital employed over the last five years have risen by 102%. The company is now earning Mex$0.2 per dollar of capital employed. In regards to capital employed, TV Azteca. de appears to been achieving more with less, since the business is using 50% less capital to run its operation. A business that's shrinking its asset base like this isn't usually typical of a soon to be multi-bagger company.

For the record though, there was a noticeable increase in the company's current liabilities over the period, so we would attribute some of the ROCE growth to that. Essentially the business now has suppliers or short-term creditors funding about 55% of its operations, which isn't ideal. And with current liabilities at those levels, that's pretty high.

The Bottom Line

In the end, TV Azteca. de has proven it's capital allocation skills are good with those higher returns from less amount of capital. Although the company may be facing some issues elsewhere since the stock has plunged 70% in the last five years. Still, it's worth doing some further research to see if the trends will continue into the future.

On a separate note, we've found 2 warning signs for TV Azteca. de you'll probably want to know about.

TV Azteca. de 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.