Here's What To Make Of Megacable Holdings S. A. B. de C. V's (BMV:MEGACPO) Decelerating Rates Of Return

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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So, when we ran our eye over Megacable Holdings S. A. B. de C. V's (BMV:MEGACPO) trend of ROCE, we liked what we saw.

What is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Megacable Holdings S. A. B. de C. V is:

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

0.15 = Mex$6.4b ÷ (Mex$50b - Mex$6.3b) (Based on the trailing twelve months to December 2020).

So, Megacable Holdings S. A. B. de C. V has an ROCE of 15%. On its own, that's a standard return, however it's much better than the 6.3% generated by the Media industry.

View our latest analysis for Megacable Holdings S. A. B. de C. V

Above you can see how the current ROCE for Megacable Holdings S. A. B. de C. V compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Megacable Holdings S. A. B. de C. V.

What Does the ROCE Trend For Megacable Holdings S. A. B. de C. V Tell Us?

While the returns on capital are good, they haven't moved much. The company has consistently earned 15% for the last five years, and the capital employed within the business has risen 84% in that time. 15% is a pretty standard return, and it provides some comfort knowing that Megacable Holdings S. A. B. de C. V has consistently earned this amount. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

In Conclusion...

In the end, Megacable Holdings S. A. B. de C. V has proven its ability to adequately reinvest capital at good rates of return. In light of this, the stock has only gained 15% over the last five years for shareholders who have owned the stock in this period. So because of the trends we're seeing, we'd recommend looking further into this stock to see if it has the makings of a multi-bagger.

If you want to continue researching Megacable Holdings S. A. B. de C. V, you might be interested to know about the 1 warning sign that our analysis has discovered.

While Megacable Holdings 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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