Organización Soriana S. A. B. de C. V (BMV:SORIANAB) Is Looking To Continue Growing Its Returns On Capital

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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So when we looked at Organización Soriana S. A. B. de C. V (BMV:SORIANAB) and its trend of ROCE, we really liked what we saw.

Understanding Return On Capital Employed (ROCE)

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. 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)

0.087 = Mex$9.1b ÷ (Mex$142b - Mex$37b) (Based on the trailing twelve months to December 2020).

Thus, Organización Soriana S. A. B. de C. V has an ROCE of 8.7%. Ultimately, that's a low return and it under-performs the Consumer Retailing industry average of 11%.

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

Above you can see how the current ROCE for Organización Soriana S. A. B. de C. V 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 Organización Soriana S. A. B. de C. V here for free.

What The Trend Of ROCE Can Tell Us

While in absolute terms it isn't a high ROCE, it's promising to see that it has been moving in the right direction. The data shows that returns on capital have increased substantially over the last five years to 8.7%. 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 31%. So we're very much inspired by what we're seeing at Organización Soriana S. A. B. de C. V thanks to its ability to profitably reinvest capital.

Our Take On Organización Soriana S. A. B. de C. V's ROCE

All in all, it's terrific to see that Organización Soriana S. A. B. de C. V is reaping the rewards from prior investments and is growing its capital base. And since the stock has fallen 49% over the last five years, there might be an opportunity here. With that in mind, we believe the promising trends warrant this stock for further investigation.

While Organización Soriana S. A. B. de C. V looks impressive, no company is worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether SORIANA B 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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