Organización Soriana S. A. B. de C. V (BMV:SORIANAB) Has More To Do To Multiply In Value Going Forward

If you're looking for a multi-bagger, there's a few things to keep an eye out for. 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 Organización Soriana S. A. B. de C. V (BMV:SORIANAB) and its ROCE trend, we weren't exactly thrilled.

What is 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. Analysts use this formula to calculate it for Organización Soriana S. A. B. de C. V:

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

0.085 = Mex$9.0b ÷ (Mex$137b - Mex$32b) (Based on the trailing twelve months to September 2021).

So, Organización Soriana S. A. B. de C. V has an ROCE of 8.5%. On its own, that's a low figure but it's around the 8.5% average generated by the Consumer Retailing industry.

View our latest analysis for Organización Soriana S. A. B. de C. V

In the above chart we have measured Organización Soriana S. A. B. de C. V'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 Organización Soriana S. A. B. de C. V here for free.

What The Trend Of ROCE Can Tell Us

Things have been pretty stable at Organización Soriana S. A. B. de C. V, with its capital employed and returns on that capital staying somewhat the same for the last five years. It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. So don't be surprised if Organización Soriana S. A. B. de C. V doesn't end up being a multi-bagger in a few years time.

In Conclusion...

In a nutshell, Organización Soriana S. A. B. de C. V has been trudging along with the same returns from the same amount of capital over the last five years. And in the last five years, the stock has given away 40% so the market doesn't look too hopeful on these trends strengthening any time soon. Therefore based on the analysis done in this article, we don't think Organización Soriana S. A. B. de C. V has the makings of a multi-bagger.

On a final note, we've found 1 warning sign for Organización Soriana S. A. B. de C. V that we think you should be aware of.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.