Investors Met With Slowing Returns on Capital At Operadora de Sites Mexicanos. de (BMV:SITES1A-1)

What are the early trends we should look for to identify a stock that could multiply in value over the long term? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Although, when we looked at Operadora de Sites Mexicanos. de (BMV:SITES1A-1), it didn't seem to tick all of these boxes.

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 Operadora de Sites Mexicanos. de, this is the formula:

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

0.05 = Mex$5.2b ÷ (Mex$105b - Mex$1.5b) (Based on the trailing twelve months to June 2024).

So, Operadora de Sites Mexicanos. de has an ROCE of 5.0%. Ultimately, that's a low return and it under-performs the Telecom industry average of 8.1%.

View our latest analysis for Operadora de Sites Mexicanos. de

Above you can see how the current ROCE for Operadora de Sites Mexicanos. 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 analyst report for Operadora de Sites Mexicanos. de .

So How Is Operadora de Sites Mexicanos. de's ROCE Trending?

There are better returns on capital out there than what we're seeing at Operadora de Sites Mexicanos. de. The company has employed 92% more capital in the last five years, and the returns on that capital have remained stable at 5.0%. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.

What We Can Learn From Operadora de Sites Mexicanos. de's ROCE

In conclusion, Operadora de Sites Mexicanos. de has been investing more capital into the business, but returns on that capital haven't increased. And investors may be recognizing these trends since the stock has only returned a total of 1.8% to shareholders over the last year. So if you're looking for a multi-bagger, the underlying trends indicate you may have better chances elsewhere.

Like most companies, Operadora de Sites Mexicanos. 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.