Promotora y Operadora de Infraestructura S. A. B. de C. V (BMV:PINFRA) Hasn't Managed To Accelerate Its Returns

Did you know there are some financial metrics that can provide clues of a potential 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. That's why when we briefly looked at Promotora y Operadora de Infraestructura S. A. B. de C. V's (BMV:PINFRA) ROCE trend, we were pretty happy with what we saw.

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. The formula for this calculation on Promotora y Operadora de Infraestructura S. A. B. de C. V is:

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

0.13 = Mex$9.1b ÷ (Mex$77b - Mex$5.3b) (Based on the trailing twelve months to September 2023).

Thus, Promotora y Operadora de Infraestructura S. A. B. de C. V has an ROCE of 13%. In absolute terms, that's a pretty standard return but compared to the Infrastructure industry average it falls behind.

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

Above you can see how the current ROCE for Promotora y Operadora de Infraestructura S. A. B. de C. V compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Promotora y Operadora de Infraestructura S. A. B. de C. V here for free.

The Trend Of ROCE

The trend of ROCE doesn't stand out much, but returns on a whole are decent. The company has consistently earned 13% for the last five years, and the capital employed within the business has risen 48% in that time. 13% 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 On Promotora y Operadora de Infraestructura S. A. B. de C. V's ROCE

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. However, over the last five years, the stock has only delivered a 9.5% return to shareholders who held over that 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.

If you'd like to know about the risks facing Promotora y Operadora de Infraestructura S. A. B. de C. V, we've discovered 2 warning signs that you should be aware of.

While Promotora y Operadora de Infraestructura 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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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.