Is Promotora y Operadora de Infraestructura S. A. B. de C. V (BMV:PINFRA) Likely To Turn Things Around?

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. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base 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 briefly looking over the numbers, we don't think Promotora y Operadora de Infraestructura S. A. B. de C. V (BMV:PINFRA) 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?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Promotora y Operadora de Infraestructura S. A. B. de C. V:

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

0.075 = Mex$5.2b ÷ (Mex$75b - Mex$5.5b) (Based on the trailing twelve months to September 2020).

Thus, Promotora y Operadora de Infraestructura S. A. B. de C. V has an ROCE of 7.5%. In absolute terms, that's a low return and it also under-performs the Infrastructure industry average of 10%.

Check out our latest analysis for Promotora y Operadora de Infraestructura S. A. B. de C. V

In the above chart we have measured Promotora y Operadora de Infraestructura S. A. B. de C. V'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 report for Promotora y Operadora de Infraestructura S. A. B. de C. V.

What Can We Tell From Promotora y Operadora de Infraestructura S. A. B. de C. V's ROCE Trend?

In terms of Promotora y Operadora de Infraestructura 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 7.5% from 17% five years ago. However it looks like Promotora y Operadora de Infraestructura S. A. B. de C. V might be reinvesting for long term growth because while capital employed has increased, the company's sales haven't changed much in the last 12 months. It's worth keeping an eye on the company's earnings from here on to see if these investments do end up contributing to the bottom line.

The Bottom Line On Promotora y Operadora de Infraestructura S. A. B. de C. V's ROCE

To conclude, we've found that Promotora y Operadora de Infraestructura S. A. B. de C. V is reinvesting in the business, but returns have been falling. Unsurprisingly then, the total return to shareholders over the last five years has been flat. Therefore based on the analysis done in this article, we don't think Promotora y Operadora de Infraestructura S. A. B. de C. V has the makings of a multi-bagger.

On a separate note, we've found 1 warning sign for Promotora y Operadora de Infraestructura S. A. B. de C. V you'll probably want to know about.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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