We Like These Underlying Return On Capital Trends At Controladora Axtel. de (BMV:CTAXTELA)

What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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. Speaking of which, we noticed some great changes in Controladora Axtel. de's (BMV:CTAXTELA) returns on capital, so let's have a look.

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. The formula for this calculation on Controladora Axtel. de is:

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

0.066 = Mex$1.3b ÷ (Mex$22b - Mex$2.6b) (Based on the trailing twelve months to June 2024).

Therefore, Controladora Axtel. de has an ROCE of 6.6%. In absolute terms, that's a low return but it's around the Telecom industry average of 7.9%.

View 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'd like to look at how Controladora Axtel. de has performed in the past in other metrics, you can view this free graph of Controladora Axtel. de's past earnings, revenue and cash flow.

What The Trend Of ROCE Can Tell Us

Controladora Axtel. de has not disappointed with their ROCE growth. The figures show that over the last two years, ROCE has grown 555% whilst employing roughly the same amount of capital. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

The Bottom Line On Controladora Axtel. de's ROCE

To bring it all together, Controladora Axtel. de has done well to increase the returns it's generating from its capital employed. And with a respectable 35% awarded to those who held the stock over the last year, you could argue that these developments are starting to get the attention they deserve. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

If you want to know some of the risks facing Controladora Axtel. de we've found 3 warning signs (2 are potentially serious!) that you should be aware of before investing here.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high 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.