Grupo Aeroportuario del Sureste S. A. B. de C. V (BMV:ASURB) Will Will Want To Turn Around Its Return Trends

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. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. However, after investigating Grupo Aeroportuario del Sureste S. A. B. de C. V (BMV:ASURB), we don't think it's current trends fit the mold of a multi-bagger.

Understanding Return On Capital Employed (ROCE)

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. To calculate this metric for Grupo Aeroportuario del Sureste S. A. B. de C. V, this is the formula:

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

0.036 = Mex$2.1b ÷ (Mex$61b - Mex$2.4b) (Based on the trailing twelve months to March 2021).

Thus, Grupo Aeroportuario del Sureste S. A. B. de C. V has an ROCE of 3.6%. In absolute terms, that's a low return and it also under-performs the Infrastructure industry average of 6.4%.

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

In the above chart we have measured Grupo Aeroportuario del Sureste S. A. B. de C. V's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

What The Trend Of ROCE Can Tell Us

On the surface, the trend of ROCE at Grupo Aeroportuario del Sureste S. A. B. de C. V doesn't inspire confidence. Around five years ago the returns on capital were 16%, but since then they've fallen to 3.6%. Given the business is employing more capital while revenue has slipped, this is a bit concerning. This could mean that the business is losing its competitive advantage or market share, because while more money is being put into ventures, it's actually producing a lower return - "less bang for their buck" per se.

The Bottom Line

In summary, we're somewhat concerned by Grupo Aeroportuario del Sureste S. A. B. de C. V's diminishing returns on increasing amounts of capital. However the stock has delivered a 43% return to shareholders over the last five years, so investors might be expecting the trends to turn around. Regardless, we don't feel too comfortable with the fundamentals so we'd be steering clear of this stock for now.

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

While Grupo Aeroportuario del Sureste S. A. B. de C. V 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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