Investors Met With Slowing Returns on Capital At El Puerto de Liverpool. de (BMV:LIVEPOLC-1)

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. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. However, after investigating El Puerto de Liverpool. de (BMV:LIVEPOLC-1), we don't think it's current trends fit the mold of a multi-bagger.

Understanding Return On Capital Employed (ROCE)

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. To calculate this metric for El Puerto de Liverpool. de, this is the formula:

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

0.10 = Mex$16b ÷ (Mex$204b - Mex$42b) (Based on the trailing twelve months to September 2021).

Therefore, El Puerto de Liverpool. de has an ROCE of 10.0%. On its own that's a low return, but compared to the average of 6.4% generated by the Multiline Retail industry, it's much better.

See our latest analysis for El Puerto de Liverpool. de

Above you can see how the current ROCE for El Puerto de Liverpool. de compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

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

In terms of El Puerto de Liverpool. de's historical ROCE trend, it doesn't exactly demand attention. The company has employed 47% more capital in the last five years, and the returns on that capital have remained stable at 10.0%. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

The Key Takeaway

As we've seen above, El Puerto de Liverpool. de's returns on capital haven't increased but it is reinvesting in the business. And in the last five years, the stock has given away 39% so the market doesn't look too hopeful on these trends strengthening any time soon. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere.

If you're still interested in El Puerto de Liverpool. de it's worth checking out our FREE intrinsic value approximation to see if it's trading at an attractive price in other respects.

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.

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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.