If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? 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. That's why when we briefly looked at Wal-Mart de México. de's (BMV:WALMEX) ROCE trend, we were very happy with 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. To calculate this metric for Wal-Mart de México. de, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.25 = Mex$76b ÷ (Mex$481b - Mex$177b) (Based on the trailing twelve months to June 2025).
So, Wal-Mart de México. de has an ROCE of 25%. 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
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 analyst report for Wal-Mart de México. de .
So How Is Wal-Mart de México. de's ROCE Trending?
In terms of Wal-Mart de México. de's history of ROCE, it's quite impressive. Over the past five years, ROCE has remained relatively flat at around 25% and the business has deployed 31% more capital into its operations. Now considering ROCE is an attractive 25%, 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
Wal-Mart de México. de has demonstrated its proficiency by generating high returns on increasing amounts of capital employed, which we're thrilled about. In light of this, the stock has only gained 12% over the last five years for shareholders who have owned the stock in this period. So because of the trends we're seeing, we'd recommend looking further into this stock to see if it has the makings of a multi-bagger.
One more thing to note, we've identified 1 warning sign with Wal-Mart de México. de and understanding this should be part of your investment process.
If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.
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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.