Returns on capital of Inmobiliaria Manquehue (SNSE:MANQUEHUE) increase


If we want to find a potential multi-bagger, there are often underlying trends that can provide clues. In a perfect world, we would like to see a company invest more capital in their business and ideally the returns from that capital also increase. Simply put, these types of businesses are slot machines, meaning they continually reinvest their profits at ever-higher rates of return. So when we looked Inmobiliaria Manquehue (SNSE:MANQUEHUE) and its ROCE trend, we really liked what we saw.

Understanding return on capital employed (ROCE)

For those unaware, ROCE is a measure of a company’s annual pre-tax profit (yield), relative to the capital employed in the business. To calculate this metric for Inmobiliaria Manquehue, here is the formula:

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

0.061 = CL$15 billion ÷ (CL$340 billion – CL$93 billion) (Based on the last twelve months to March 2022).

So, Inmobiliaria Manquehue has a ROCE of 6.1%. In absolute terms, that’s a weak return, and it’s also below the consumer durables industry average of 12%.

Check out our latest review for Inmobiliaria Manquehue

SNSE:MANQUEHUE Return on Capital Employed August 27, 2022

Although the past is not indicative of the future, it can be useful to know the historical performance of a company, which is why we have this graph above. If you want to investigate more about Inmobiliaria Manquehue’s past, check out this free chart of past profits, revenue and cash flow.

What does the ROCE trend tell us for Inmobiliaria Manquehue?

Inmobiliaria Manquehue is promising given that its ROCE is up and to the right. Looking at the data, we can see that even though the capital employed in the business has remained relatively stable, the ROCE generated has increased by 160% over the past five years. It is therefore likely that the company is now reaping all the benefits of its past investments, since the capital employed has not changed much. The company is doing well in this direction, and it is worth examining what the management team has planned for the long-term growth prospects.

The essential

To sum up, Inmobiliaria Manquehue collects higher returns from the same amount of capital, and that’s impressive. Given that the stock has fallen 63% in the last three years, it could be a good investment if the valuation and other metrics are also attractive. That said, research into the company’s current valuation metrics and future prospects seems appropriate.

If you want to know more about Inmobiliaria Manquehue, we have spotted 3 warning signs, and 1 of them is a little disturbing.

If you want to look for strong companies with excellent earnings, check out this free list of companies with strong balance sheets and impressive returns on equity.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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