Grupo Aeroportuario del Pacífico. de (BMV:GAPB) Looks To Prolong Its Impressive Returns

There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. With that in mind, the ROCE of Grupo Aeroportuario del Pacífico. de (BMV:GAPB) looks attractive right now, so lets see what the trend of returns can tell us.

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. Analysts use this formula to calculate it for Grupo Aeroportuario del Pacífico. de:

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

0.25 = Mex$15b ÷ (Mex$79b - Mex$20b) (Based on the trailing twelve months to September 2024).

So, Grupo Aeroportuario del Pacífico. de has an ROCE of 25%. In absolute terms that's a great return and it's even better than the Infrastructure industry average of 14%.

See our latest analysis for Grupo Aeroportuario del Pacífico. de

In the above chart we have measured Grupo Aeroportuario del Pacífico. de's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Grupo Aeroportuario del Pacífico. de .

What Can We Tell From Grupo Aeroportuario del Pacífico. de's ROCE Trend?

We'd be pretty happy with returns on capital like Grupo Aeroportuario del Pacífico. de. The company has employed 62% more capital in the last five years, and the returns on that capital have remained stable at 25%. Returns like this are the envy of most businesses and given it has repeatedly reinvested at these rates, that's even better. If Grupo Aeroportuario del Pacífico. de can keep this up, we'd be very optimistic about its future.

Another point to note, we noticed the company has increased current liabilities over the last five years. This is intriguing because if current liabilities hadn't increased to 26% of total assets, this reported ROCE would probably be less than25% because total capital employed would be higher.The 25% ROCE could be even lower if current liabilities weren't 26% of total assets, because the the formula would show a larger base of total capital employed. With that in mind, just be wary if this ratio increases in the future, because if it gets particularly high, this brings with it some new elements of risk.

The Bottom Line

In summary, we're delighted to see that Grupo Aeroportuario del Pacífico. de has been compounding returns by reinvesting at consistently high rates of return, as these are common traits of a multi-bagger. And long term investors would be thrilled with the 110% return they've received over the last five years. So even though the stock might be more "expensive" than it was before, we think the strong fundamentals warrant this stock for further research.

On a final note, we've found 2 warning signs for Grupo Aeroportuario del Pacífico. de that we think you should be aware of.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets 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.