Promotora y Operadora de Infraestructura S. A. B. de C. V (BMV:PINFRA) Has More To Do To Multiply In Value Going Forward

To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So, when we ran our eye over Promotora y Operadora de Infraestructura S. A. B. de C. V's (BMV:PINFRA) trend of ROCE, we liked what we saw.

Understanding Return On Capital Employed (ROCE)

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the 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)

0.12 = Mex$8.2b ÷ (Mex$75b - Mex$4.9b) (Based on the trailing twelve months to December 2022).

Thus, Promotora y Operadora de Infraestructura S. A. B. de C. V has an ROCE of 12%. By itself that's a normal return on capital and it's in line with the industry's average returns of 12%.

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're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

SWOT Analysis for Promotora y Operadora de Infraestructura S. A. B. de C. V

What The Trend Of ROCE Can Tell Us

While the current returns on capital are decent, they haven't changed much. Over the past five years, ROCE has remained relatively flat at around 12% and the business has deployed 48% more capital into its operations. 12% is a pretty standard return, and it provides some comfort knowing that Promotora y Operadora de Infraestructura S. A. B. de C. V has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

The Bottom Line

The main thing to remember is that Promotora y Operadora de Infraestructura S. A. B. de C. V has proven its ability to continually reinvest at respectable rates of return. In light of this, the stock has only gained 15% over the last five years for shareholders who have owned the stock in this period. So because of the trends we're seeing, we'd recommend looking further into this stock to see if it has the makings of a multi-bagger.

Promotora y Operadora de Infraestructura S. A. B. de C. V does have some risks though, and we've spotted 1 warning sign for Promotora y Operadora de Infraestructura S. A. B. de C. V that you might be interested in.

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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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.