Anheuser-Busch InBev's (EBR:ABI) Returns Have Hit A Wall

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. 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. In light of that, when we looked at Anheuser-Busch InBev (EBR:ABI) and its ROCE trend, we weren't exactly thrilled.

Return On Capital Employed (ROCE): What Is It?

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 Anheuser-Busch InBev, this is the formula:

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

0.082 = US$15b ÷ (US$213b - US$34b) (Based on the trailing twelve months to March 2023).

Thus, Anheuser-Busch InBev has an ROCE of 8.2%. On its own, that's a low figure but it's around the 9.7% average generated by the Beverage industry.

See our latest analysis for Anheuser-Busch InBev

In the above chart we have measured Anheuser-Busch InBev's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Anheuser-Busch InBev here for free.

SWOT Analysis for Anheuser-Busch InBev

How Are Returns Trending?

Over the past five years, Anheuser-Busch InBev's ROCE and capital employed have both remained mostly flat. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. So don't be surprised if Anheuser-Busch InBev doesn't end up being a multi-bagger in a few years time. This probably explains why Anheuser-Busch InBev is paying out 36% of its income to shareholders in the form of dividends. Unless businesses have highly compelling growth opportunities, they'll typically return some money to shareholders.

The Bottom Line On Anheuser-Busch InBev's ROCE

We can conclude that in regards to Anheuser-Busch InBev's returns on capital employed and the trends, there isn't much change to report on. And investors appear hesitant that the trends will pick up because the stock has fallen 34% in the last five years. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere.

If you want to continue researching Anheuser-Busch InBev, you might be interested to know about the 1 warning sign that our analysis has discovered.

While Anheuser-Busch InBev isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.