Return Trends At Operadora de Sites Mexicanos. de (BMV:SITES1A-1) Aren't Appealing

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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. However, after briefly looking over the numbers, we don't think Operadora de Sites Mexicanos. de (BMV:SITES1A-1) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

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. Analysts use this formula to calculate it for Operadora de Sites Mexicanos. de:

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

0.058 = Mex$5.5b ÷ (Mex$106b - Mex$11b) (Based on the trailing twelve months to September 2024).

So, Operadora de Sites Mexicanos. de has an ROCE of 5.8%. In absolute terms, that's a low return but it's around the Telecom industry average of 6.6%.

Check out our latest analysis for Operadora de Sites Mexicanos. de

In the above chart we have measured Operadora de Sites Mexicanos. de's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Operadora de Sites Mexicanos. de for free.

What Can We Tell From Operadora de Sites Mexicanos. de's ROCE Trend?

In terms of Operadora de Sites Mexicanos. de's historical ROCE trend, it doesn't exactly demand attention. Over the past five years, ROCE has remained relatively flat at around 5.8% and the business has deployed 91% more capital into its operations. 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.

Our Take On Operadora de Sites Mexicanos. de's ROCE

In summary, Operadora de Sites Mexicanos. de has simply been reinvesting capital and generating the same low rate of return as before. And in the last year, the stock has given away 44% so the market doesn't look too hopeful on these trends strengthening any time soon. Therefore based on the analysis done in this article, we don't think Operadora de Sites Mexicanos. de has the makings of a multi-bagger.

One more thing, we've spotted 1 warning sign facing Operadora de Sites Mexicanos. de that you might find interesting.

While Operadora de Sites Mexicanos. 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.