Capital Investments At Wal-Mart de México. de (BMV:WALMEX) Point To A Promising Future

If you're looking for a multi-bagger, there's a few things to 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. With that in mind, the ROCE of Wal-Mart de México. de (BMV:WALMEX) looks attractive right now, so lets see what the trend of returns can tell us.

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

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for Wal-Mart de México. de:

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

0.24 = Mex$77b ÷ (Mex$494b - Mex$174b) (Based on the trailing twelve months to December 2024).

Therefore, Wal-Mart de México. de has an ROCE of 24%. That's a fantastic return and not only that, it outpaces the average of 18% earned by companies in a similar industry.

Check out our latest analysis for Wal-Mart de México. de

Above you can see how the current ROCE for Wal-Mart de México. 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 Wal-Mart de México. de for free.

So How Is Wal-Mart de México. de's ROCE Trending?

Wal-Mart de México. de deserves to be commended in regards to it's returns. The company has consistently earned 24% for the last five years, and the capital employed within the business has risen 36% in that time. With returns that high, it's great that the business can continually reinvest its money at such appealing rates of return. You'll see this when looking at well operated businesses or favorable business models.

The Bottom Line

In short, we'd argue Wal-Mart de México. de has the makings of a multi-bagger since its been able to compound its capital at very profitable rates of return. And given the stock has only risen 21% over the last five years, we'd suspect the market is beginning to recognize these trends. That's why it could be worth your time looking into this stock further to discover if it has more traits of a multi-bagger.

One more thing to note, we've identified 1 warning sign with Wal-Mart de México. de and understanding it should be part of your investment process.

High returns are a key ingredient to strong performance, so check out our free list ofstocks earning high returns on equity with solid balance sheets.

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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.