Stock Analysis

Wal-Mart de México. de (BMV:WALMEX) Is Aiming To Keep Up Its Impressive Returns

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BMV:WALMEX *
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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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So, when we ran our eye over Wal-Mart de México. de's (BMV:WALMEX) trend of ROCE, we really liked what we saw.

Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Wal-Mart de México. de is:

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

0.27 = Mex$66b ÷ (Mex$396b - Mex$148b) (Based on the trailing twelve months to June 2022).

So, Wal-Mart de México. de has an ROCE of 27%. In absolute terms that's a great return and it's even better than the Consumer Retailing industry average of 10%.

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

roce
BMV:WALMEX * Return on Capital Employed September 30th 2022

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're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

How Are Returns Trending?

It's hard not to be impressed by Wal-Mart de México. de's returns on capital. The company has employed 51% more capital in the last five years, and the returns on that capital have remained stable at 27%. Now considering ROCE is an attractive 27%, this combination is actually pretty appealing because it means the business can consistently put money to work and generate these high returns. 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

In summary, we're delighted to see that Wal-Mart de México. de has been compounding returns by reinvesting at consistently high rates of return, as these are common traits of a multi-bagger. Therefore it's no surprise that shareholders have earned a respectable 97% return if they held over the last five years. So even though the stock might be more "expensive" than it was before, we think the strong fundamentals warrant this stock for further research.

On the other side of ROCE, we have to consider valuation. That's why we have a FREE intrinsic value estimation on our platform that is definitely worth checking out.

Wal-Mart de México. de is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

Valuation is complex, but we're helping make it simple.

Find out whether Wal-Mart de México. de is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

About BMV:WALMEX *

Wal-Mart de México. de

Wal-Mart de México, S.A.B. de C.V. owns and operates self-service stores in Mexico and Central America.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation0
Future Growth4
Past Performance4
Financial Health6
Dividends5

Read more about these checks in the individual report sections or in our analysis model.

Flawless balance sheet established dividend payer.