There's Been No Shortage Of Growth Recently For Coca-Cola FEMSA. de's (NYSE:KOF) Returns On Capital
If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Speaking of which, we noticed some great changes in Coca-Cola FEMSA. de's (NYSE:KOF) returns on capital, so let's have a look.
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 Coca-Cola FEMSA. de is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.14 = Mex$30b ÷ (Mex$278b - Mex$58b) (Based on the trailing twelve months to December 2022).
Thus, Coca-Cola FEMSA. de has an ROCE of 14%. That's a pretty standard return and it's in line with the industry average of 14%.
See our latest analysis for Coca-Cola FEMSA. de
Above you can see how the current ROCE for Coca-Cola FEMSA. de compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.
What The Trend Of ROCE Can Tell Us
Coca-Cola FEMSA. de has not disappointed with their ROCE growth. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 28% over the last five years. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.
The Bottom Line On Coca-Cola FEMSA. de's ROCE
In summary, we're delighted to see that Coca-Cola FEMSA. de has been able to increase efficiencies and earn higher rates of return on the same amount of capital. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 41% return over the last five years. In light of that, we think it's worth looking further into this stock because if Coca-Cola FEMSA. de can keep these trends up, it could have a bright future ahead.
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 that compares the share price and estimated value.
While Coca-Cola FEMSA. 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.
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