Shareholders Are Optimistic That Wal-Mart de México. de (BMV:WALMEX) Will Multiply In Value

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. 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.

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. 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)

0.25 = Mex$62b ÷ (Mex$393b - Mex$147b) (Based on the trailing twelve months to September 2021).

Therefore, Wal-Mart de México. de has an ROCE of 25%. That's a fantastic return and not only that, it outpaces the average of 8.4% earned by companies in a similar industry.

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

In the above chart we have measured Wal-Mart de México. de'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 Wal-Mart de México. de.

How Are Returns Trending?

We'd be pretty happy with returns on capital like Wal-Mart de México. de. Over the past five years, ROCE has remained relatively flat at around 25% and the business has deployed 39% more capital into its operations. Returns like this are the envy of most businesses and given it has repeatedly reinvested at these rates, that's even better. If these trends can continue, it wouldn't surprise us if the company became a multi-bagger.

The Bottom Line On Wal-Mart de México. de's ROCE

Wal-Mart de México. de has demonstrated its proficiency by generating high returns on increasing amounts of capital employed, which we're thrilled about. On top of that, the stock has rewarded shareholders with a remarkable 144% return to those who've held over the last five years. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

Before jumping to any conclusions though, we need to know what value we're getting for the current share price. That's where you can check out our FREE intrinsic value estimation that compares the share price and estimated value.

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.