There's Been No Shortage Of Growth Recently For Controladora Vuela Compañía de Aviación. de's (BMV:VOLARA) Returns On Capital

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. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, we've noticed some promising trends at Controladora Vuela Compañía de Aviación. de (BMV:VOLARA) so let's look a bit deeper.

What Is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Controladora Vuela Compañía de Aviación. de, this is the formula:

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

0.10 = US$361m ÷ (US$5.4b - US$1.8b) (Based on the trailing twelve months to June 2024).

Thus, Controladora Vuela Compañía de Aviación. de has an ROCE of 10%. That's a relatively normal return on capital, and it's around the 8.8% generated by the Airlines industry.

See our latest analysis for Controladora Vuela Compañía de Aviación. de

Above you can see how the current ROCE for Controladora Vuela Compañía de Aviación. de 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 Controladora Vuela Compañía de Aviación. de .

How Are Returns Trending?

The trends we've noticed at Controladora Vuela Compañía de Aviación. de are quite reassuring. Over the last five years, returns on capital employed have risen substantially to 10%. The amount of capital employed has increased too, by 61%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

In Conclusion...

In summary, it's great to see that Controladora Vuela Compañía de Aviación. de can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And since the stock has fallen 39% over the last five years, there might be an opportunity here. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

Before jumping to any conclusions though, we need to know what value we're getting for the current share price. That's where you can check out our FREE intrinsic value estimation for VOLAR A that compares the share price and estimated value.

While Controladora Vuela Compañía de Aviación. 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.