Return Trends At El Puerto de Liverpool. de (BMV:LIVEPOLC-1) Aren't Appealing

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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. That's why when we briefly looked at El Puerto de Liverpool. de's (BMV:LIVEPOLC-1) ROCE trend, we were pretty happy with what we saw.

Return On Capital Employed (ROCE): What Is It?

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 El Puerto de Liverpool. de:

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

0.15 = Mex$28b ÷ (Mex$235b - Mex$46b) (Based on the trailing twelve months to September 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 8.2% generated by the Multiline Retail industry.

See 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 to see what analysts are forecasting going forward, you should check out our free report for El Puerto de Liverpool. de.

What Can We Tell From El Puerto de Liverpool. de's ROCE Trend?

While the current returns on capital are decent, they haven't changed much. Over the past five years, ROCE has remained relatively flat at around 15% and the business has deployed 43% more capital into its operations. 15% is a pretty standard return, and it provides some comfort knowing that El Puerto de Liverpool. de has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

In Conclusion...

In the end, El Puerto de Liverpool. de has proven its ability to adequately reinvest capital at good rates of return. However, over the last five years, the stock hasn't provided much growth to shareholders in the way of total returns. For that reason, savvy investors might want to look further into this company in case it's a prime investment.

Like most companies, El Puerto de Liverpool. de does come with some risks, and we've found 1 warning sign that you should be aware of.

While El Puerto de Liverpool. de may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.