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

There are a few key trends to look for if we want to identify the next multi-bagger. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing 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. Ergo, when we looked at the ROCE trends at Wal-Mart de México. de (BMV:WALMEX), we liked what we saw.

Understanding Return On Capital Employed (ROCE)

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the 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)

0.28 = Mex$71b ÷ (Mex$413b - Mex$160b) (Based on the trailing twelve months to June 2023).

Thus, Wal-Mart de México. de has an ROCE of 28%. In absolute terms that's a great return and it's even better than the Consumer Retailing industry average of 18%.

See 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 to see what analysts are forecasting going forward, you should check out our free report for Wal-Mart de México. de.

The Trend Of ROCE

Wal-Mart de México. de deserves to be commended in regards to it's returns. The company has employed 42% more capital in the last five years, and the returns on that capital have remained stable at 28%. With returns that high, it's great that the business can continually reinvest its money at such appealing rates of return. If Wal-Mart de México. de can keep this up, we'd be very optimistic about its future.

The Bottom Line

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 44% return if they held over the last five years. So while investors seem to be recognizing these promising trends, we still believe the stock deserves 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.

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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.