The Returns At Operadora de Sites Mexicanos. de (BMV:SITES1A-1) Aren't Growing

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'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher 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.

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. The formula for this calculation on Operadora de Sites Mexicanos. de is:

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

0.046 = Mex$4.7b ÷ (Mex$104b - Mex$1.3b) (Based on the trailing twelve months to December 2023).

Therefore, Operadora de Sites Mexicanos. de has an ROCE of 4.6%. Ultimately, that's a low return and it under-performs the Telecom industry average of 8.3%.

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'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?

The returns on capital haven't changed much for Operadora de Sites Mexicanos. de in recent years. The company has employed 135% more capital in the last five years, and the returns on that capital have remained stable at 4.6%. 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.

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

Long story short, while Operadora de Sites Mexicanos. de has been reinvesting its capital, the returns that it's generating haven't increased. Although the market must be expecting these trends to improve because the stock has gained 11% over the last year. Ultimately, if the underlying trends persist, we wouldn't hold our breath on it being a multi-bagger going forward.

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

While Operadora de Sites Mexicanos. de isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.