We're Watching These Trends At Grupo Comercial Chedraui. de (BMV:CHDRAUIB)

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. However, after investigating Grupo Comercial Chedraui. de (BMV:CHDRAUIB), we don't think it's current trends fit the mold of a multi-bagger.

Return On Capital Employed (ROCE): What is it?

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. Analysts use this formula to calculate it for Grupo Comercial Chedraui. de:

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

0.099 = Mex$6.6b ÷ (Mex$90b - Mex$24b) (Based on the trailing twelve months to September 2020).

Thus, Grupo Comercial Chedraui. de has an ROCE of 9.9%. On its own, that's a low figure but it's around the 9.4% average generated by the Consumer Retailing industry.

See our latest analysis for Grupo Comercial Chedraui. de

In the above chart we have measured Grupo Comercial Chedraui. de'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 Grupo Comercial Chedraui. de here for free.

How Are Returns Trending?

The returns on capital haven't changed much for Grupo Comercial Chedraui. de in recent years. The company has employed 117% more capital in the last five years, and the returns on that capital have remained stable at 9.9%. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

In Conclusion...

In conclusion, Grupo Comercial Chedraui. de has been investing more capital into the business, but returns on that capital haven't increased. And investors appear hesitant that the trends will pick up because the stock has fallen 38% in the last five years. Therefore based on the analysis done in this article, we don't think Grupo Comercial Chedraui. de has the makings of a multi-bagger.

Grupo Comercial Chedraui. de could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation on our platform quite valuable.

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. 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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