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

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher 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.

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. To calculate this metric for Promotora y Operadora de Infraestructura S. A. B. de C. V, this is the formula:

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

0.14 = Mex$10b ÷ (Mex$79b - Mex$5.7b) (Based on the trailing twelve months to March 2024).

Thus, Promotora y Operadora de Infraestructura S. A. B. de C. V has an ROCE of 14%. In absolute terms, that's a pretty standard return but compared to the Infrastructure industry average it falls behind.

View 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 to see what analysts are forecasting going forward, you should check out our free analyst 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?

The trend of ROCE doesn't stand out much, but returns on a whole are decent. The company has employed 37% more capital in the last five years, and the returns on that capital have remained stable at 14%. Since 14% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. 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.

In Conclusion...

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 4.4% over the last five years for shareholders who have owned the stock in this period. So to determine if Promotora y Operadora de Infraestructura S. A. B. de C. V is a multi-bagger going forward, we'd suggest digging deeper into the company's other fundamentals.

One more thing, we've spotted 2 warning signs facing Promotora y Operadora de Infraestructura S. A. B. de C. V that you might find interesting.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high 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.