Budweiser Brewing Company APAC (HKG:1876) Is Experiencing Growth In Returns On Capital

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So on that note, Budweiser Brewing Company APAC (HKG:1876) looks quite promising in regards to its trends of return on capital.

Understanding Return On Capital Employed (ROCE)

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. To calculate this metric for Budweiser Brewing Company APAC, this is the formula:

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

0.12 = US$1.4b ÷ (US$17b - US$4.7b) (Based on the trailing twelve months to December 2021).

So, Budweiser Brewing Company APAC has an ROCE of 12%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Beverage industry average of 10%.

See our latest analysis for Budweiser Brewing Company APAC

In the above chart we have measured Budweiser Brewing Company APAC's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Budweiser Brewing Company APAC.

So How Is Budweiser Brewing Company APAC's ROCE Trending?

Budweiser Brewing Company APAC is showing promise given that its ROCE is trending up and to the right. 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 51% over the last four years. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. 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 Budweiser Brewing Company APAC's ROCE

In summary, we're delighted to see that Budweiser Brewing Company APAC 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 year, there might be an opportunity here if other metrics are strong. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

While Budweiser Brewing Company APAC looks impressive, no company is worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether 1876 is currently trading for a fair price.

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.

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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.