Grupo Comercial Chedraui. de (BMV:CHDRAUIB) Is Doing The Right Things To Multiply Its Share Price

There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Speaking of which, we noticed some great changes in Grupo Comercial Chedraui. de's (BMV:CHDRAUIB) returns on capital, so let's have a look.

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

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. To calculate this metric for Grupo Comercial Chedraui. de, this is the formula:

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

0.16 = Mex$16b ÷ (Mex$140b - Mex$44b) (Based on the trailing twelve months to December 2023).

Therefore, Grupo Comercial Chedraui. de has an ROCE of 16%. That's a relatively normal return on capital, and it's around the 18% generated by the Consumer Retailing industry.

See our latest analysis for Grupo Comercial Chedraui. de

Above you can see how the current ROCE for Grupo Comercial Chedraui. de compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Grupo Comercial Chedraui. de for free.

What Can We Tell From Grupo Comercial Chedraui. de's ROCE Trend?

Investors would be pleased with what's happening at Grupo Comercial Chedraui. de. Over the last five years, returns on capital employed have risen substantially to 16%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 52%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

What We Can Learn From Grupo Comercial Chedraui. de's ROCE

All in all, it's terrific to see that Grupo Comercial Chedraui. de is reaping the rewards from prior investments and is growing its capital base. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. Therefore, we think it would be worth your time to check if these trends are going to continue.

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 for CHDRAUI B that compares the share price and estimated value.

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.