Returns On Capital Are Showing Encouraging Signs At Controladora Axtel. de (BMV:CTAXTELA)

There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing 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. So on that note, Controladora Axtel. de (BMV:CTAXTELA) looks quite promising in regards to its trends of return on capital.

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Understanding Return On Capital Employed (ROCE)

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. To calculate this metric for Controladora Axtel. de, this is the formula:

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

0.094 = Mex$1.4b ÷ (Mex$17b - Mex$2.9b) (Based on the trailing twelve months to December 2024).

Thus, Controladora Axtel. de has an ROCE of 9.4%. On its own that's a low return, but compared to the average of 7.7% generated by the Telecom industry, it's much better.

See our latest analysis for Controladora Axtel. de

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Controladora Axtel. de.

How Are Returns Trending?

We're pretty happy with how the ROCE has been trending at Controladora Axtel. de. The figures show that over the last three years, returns on capital have grown by 786%. The company is now earning Mex$0.09 per dollar of capital employed. Interestingly, the business may be becoming more efficient because it's applying 32% less capital than it was three years ago. If this trend continues, the business might be getting more efficient but it's shrinking in terms of total assets.

In Conclusion...

In a nutshell, we're pleased to see that Controladora Axtel. de has been able to generate higher returns from less capital. Since the stock has returned a staggering 199% to shareholders over the last year, it looks like investors are recognizing these changes. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

Like most companies, Controladora Axtel. de does come with some risks, and we've found 2 warning signs that you should be aware of.

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.