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There's Been No Shortage Of Growth Recently For Coca-Cola FEMSA. de's (NYSE:KOF) Returns On Capital

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  • KOF
  • COCSF

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So on that note, Coca-Cola FEMSA. de (NYSE:KOF) looks quite promising in regards to its trends of return on capital.

Understanding Return On Capital Employed (ROCE)

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for Coca-Cola FEMSA. de, this is the formula:

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

0.13 = Mex$29b ÷ (Mex$269b - Mex$48b) (Based on the trailing twelve months to September 2021).

Therefore, Coca-Cola FEMSA. de has an ROCE of 13%. That's a pretty standard return and it's in line with the industry average of 13%.

See our latest analysis for Coca-Cola FEMSA. de

roce
roce

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'd like to see what analysts are forecasting going forward, you should check out our free report for Coca-Cola FEMSA. de.

How Are Returns Trending?

Coca-Cola FEMSA. de's ROCE growth is quite impressive. The figures show that over the last five years, ROCE has grown 23% whilst employing roughly the same amount of capital. 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.

Our Take 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 given the stock has remained rather flat over the last five years, there might be an opportunity here if other metrics are strong. So researching this company further and determining whether or not these trends will continue seems justified.

On a final note, we've found 1 warning sign for Coca-Cola FEMSA. de that we think you should be aware of.

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.

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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