The Trends At Organización Soriana S. A. B. de C. V (BMV:SORIANAB) That You Should Know About

There are a few key trends to look for if we want to identify the next multi-bagger. 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. However, after investigating Organización Soriana S. A. B. de C. V (BMV:SORIANAB), 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 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 Organización Soriana S. A. B. de C. V, this is the formula:

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

0.094 = Mex$9.2b ÷ (Mex$140b - Mex$41b) (Based on the trailing twelve months to September 2020).

So, Organización Soriana S. A. B. de C. V has an ROCE of 9.4%. Even though it's in line with the industry average of 9.4%, it's still a low return by itself.

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 to see what analysts are forecasting going forward, you should check out our free report for Organización Soriana S. A. B. de C. V.

How Are Returns Trending?

There are better returns on capital out there than what we're seeing at Organización Soriana S. A. B. de C. V. Over the past five years, ROCE has remained relatively flat at around 9.4% and the business has deployed 60% more capital into its operations. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.

The Bottom Line

As we've seen above, Organización Soriana S. A. B. de C. V's returns on capital haven't increased but it is reinvesting in the business. And investors appear hesitant that the trends will pick up because the stock has fallen 56% in the last five years. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere.

One more thing, we've spotted 1 warning sign facing Organización Soriana S. A. B. de C. V that you might find interesting.

While Organización Soriana S. A. B. de C. V may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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