The Returns On Capital At Grupo Aeroportuario del Centro Norte. de (BMV:OMAB) Don't Inspire Confidence

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. 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. In light of that, when we looked at Grupo Aeroportuario del Centro Norte. de (BMV:OMAB) and its ROCE trend, we weren't exactly thrilled.

What is 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. The formula for this calculation on Grupo Aeroportuario del Centro Norte. de is:

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

0.18 = Mex$3.4b ÷ (Mex$21b - Mex$1.9b) (Based on the trailing twelve months to September 2021).

Thus, Grupo Aeroportuario del Centro Norte. de has an ROCE of 18%. In absolute terms, that's a satisfactory return, but compared to the Infrastructure industry average of 9.4% it's much better.

View our latest analysis for Grupo Aeroportuario del Centro Norte. de

In the above chart we have measured Grupo Aeroportuario del Centro Norte. 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 Grupo Aeroportuario del Centro Norte. de here for free.

So How Is Grupo Aeroportuario del Centro Norte. de's ROCE Trending?

When we looked at the ROCE trend at Grupo Aeroportuario del Centro Norte. de, we didn't gain much confidence. Around five years ago the returns on capital were 22%, but since then they've fallen to 18%. 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. If these investments prove successful, this can bode very well for long term stock performance.

What We Can Learn From Grupo Aeroportuario del Centro Norte. de'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 Centro Norte. de. Furthermore the stock has climbed 87% over the last five years, it would appear that investors are upbeat about the future. So while investors seem to be recognizing these promising trends, we would look further into this stock to make sure the other metrics justify the positive view.

If you'd like to know about the risks facing Grupo Aeroportuario del Centro Norte. de, we've discovered 1 warning sign that you should be aware of.

While Grupo Aeroportuario del Centro Norte. 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.