Investors Will Want Arca Continental. de's (BMV:AC) Growth In ROCE To Persist

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. With that in mind, we've noticed some promising trends at Arca Continental. de (BMV:AC) so let's look a bit deeper.

What Is Return On Capital Employed (ROCE)?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested 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)

0.18 = Mex$34b ÷ (Mex$242b - Mex$46b) (Based on the trailing twelve months to March 2024).

Thus, Arca Continental. de has an ROCE of 18%. In absolute terms, that's a satisfactory return, but compared to the Beverage industry average of 12% it's much better.

Check out our latest analysis for Arca Continental. de

In the above chart we have measured Arca Continental. de's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Arca Continental. de for free.

What Can We Tell From Arca Continental. de's ROCE Trend?

Arca Continental. de has not disappointed with their ROCE growth. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 98% over the last five years. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

What We Can Learn From Arca Continental. de's ROCE

To sum it up, Arca Continental. de is collecting higher returns from the same amount of capital, and that's impressive. Since the stock has returned a staggering 107% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if Arca Continental. de can keep these trends up, it could have a bright future ahead.

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 isn't earning the highest return, check out this free list of companies that are 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com