El Puerto de Liverpool. de (BMV:LIVEPOLC-1) Is Experiencing Growth In Returns On Capital

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. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount 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. Speaking of which, we noticed some great changes in El Puerto de Liverpool. de's (BMV:LIVEPOLC-1) returns on capital, so let's have a look.

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. Analysts use this formula to calculate it for El Puerto de Liverpool. de:

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

0.15 = Mex$29b ÷ (Mex$259b - Mex$70b) (Based on the trailing twelve months to December 2023).

Therefore, El Puerto de Liverpool. de 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 Multiline Retail industry.

Check out our latest analysis for El Puerto de Liverpool. de

In the above chart we have measured El Puerto de Liverpool. de's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering El Puerto de Liverpool. de for free.

So How Is El Puerto de Liverpool. de's ROCE Trending?

Investors would be pleased with what's happening at El Puerto de Liverpool. de. Over the last five years, returns on capital employed have risen substantially to 15%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 39%. So we're very much inspired by what we're seeing at El Puerto de Liverpool. de thanks to its ability to profitably reinvest capital.

Our Take On El Puerto de Liverpool. de's ROCE

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 El Puerto de Liverpool. de has. Considering the stock has delivered 34% to its stockholders over the last five years, it may be fair to think that investors aren't fully aware of the promising trends yet. Given that, we'd look further into this stock in case it has more traits that could make it multiply in the long term.

While El Puerto de Liverpool. de looks impressive, no company is worth an infinite price. The intrinsic value infographic for LIVEPOL C-1 helps visualize whether it is currently trading for a fair price.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.