Arca Continental. de (BMV:AC) Is Experiencing Growth In Returns On Capital

There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So when we looked at Arca Continental. de (BMV:AC) and its trend of ROCE, we really liked what we saw.

What Is Return On Capital Employed (ROCE)?

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. The formula for this calculation on Arca Continental. de is:

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

0.15 = Mex$36b ÷ (Mex$278b - Mex$44b) (Based on the trailing twelve months to September 2024).

Thus, Arca Continental. de has an ROCE of 15%. In absolute terms, that's a satisfactory return, but compared to the Beverage industry average of 11% it's much better.

See our latest analysis for Arca Continental. de

Above you can see how the current ROCE for Arca Continental. 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 analyst report for Arca Continental. de .

What Does the ROCE Trend For Arca Continental. de Tell Us?

Arca Continental. de is showing promise given that its ROCE is trending up and to the right. The figures show that over the last five years, ROCE has grown 70% whilst employing roughly the same amount of capital. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

The Bottom Line On Arca Continental. de's ROCE

To bring it all together, Arca Continental. de has done well to increase the returns it's generating from its capital employed. And a remarkable 118% total return over the last five years tells us that investors are expecting more good things to come in the future. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

On a separate note, we've found 1 warning sign for Arca Continental. de you'll probably want to know about.

While Arca Continental. de may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list 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.