Be Wary Of Grupo Aeroportuario del Sureste S. A. B. de C. V (BMV:ASURB) And Its Returns On Capital

What are the early trends we should look for to identify a stock that could multiply in value over the long term? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount 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. Although, when we looked at Grupo Aeroportuario del Sureste S. A. B. de C. V (BMV:ASURB), it didn't seem to tick all of these boxes.

Return On Capital Employed (ROCE): What is it?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on Grupo Aeroportuario del Sureste S. A. B. de C. V is:

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

0.12 = Mex$7.0b ÷ (Mex$66b - Mex$6.1b) (Based on the trailing twelve months to September 2021).

Thus, Grupo Aeroportuario del Sureste S. A. B. de C. V has an ROCE of 12%. On its own, that's a standard return, however it's much better than the 9.4% generated by the Infrastructure industry.

See our latest analysis for Grupo Aeroportuario del Sureste S. A. B. de C. V

Above you can see how the current ROCE for Grupo Aeroportuario del Sureste S. A. B. de C. V 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 Grupo Aeroportuario del Sureste S. A. B. de C. V here for free.

How Are Returns Trending?

In terms of Grupo Aeroportuario del Sureste S. A. B. de C. V's historical ROCE movements, the trend isn't fantastic. Over the last five years, returns on capital have decreased to 12% from 17% five years ago. Although, given both revenue and the amount of assets employed in the business have increased, it could suggest the company is investing in growth, and the extra capital has led to a short-term reduction in ROCE. And if the increased capital generates additional returns, the business, and thus shareholders, will benefit in the long run.

Our Take On Grupo Aeroportuario del Sureste S. A. B. de C. V's ROCE

Even though returns on capital have fallen in the short term, we find it promising that revenue and capital employed have both increased for Grupo Aeroportuario del Sureste S. A. B. de C. V. Furthermore the stock has climbed 54% over the last five years, it would appear that investors are upbeat about the future. So should these growth trends continue, we'd be optimistic on the stock going forward.

One more thing to note, we've identified 1 warning sign with Grupo Aeroportuario del Sureste S. A. B. de C. V and understanding this should be part of your investment process.

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.