Grupo Bimbo. de (BMV:BIMBOA) Could Become A Multi-Bagger

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding 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. And in light of that, the trends we're seeing at Grupo Bimbo. de's (BMV:BIMBOA) look very promising so lets take a look.

Return On Capital Employed (ROCE): What Is It?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Grupo Bimbo. de:

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

0.21 = Mex$54b ÷ (Mex$348b - Mex$90b) (Based on the trailing twelve months to December 2022).

Thus, Grupo Bimbo. de has an ROCE of 21%. In absolute terms that's a great return and it's even better than the Food industry average of 14%.

View our latest analysis for Grupo Bimbo. de

In the above chart we have measured Grupo Bimbo. 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 report for Grupo Bimbo. de.

So How Is Grupo Bimbo. de's ROCE Trending?

We like the trends that we're seeing from Grupo Bimbo. de. Over the last five years, returns on capital employed have risen substantially to 21%. Basically the business is earning more per dollar of capital invested and in addition to that, 22% more capital is being employed now too. So we're very much inspired by what we're seeing at Grupo Bimbo. de thanks to its ability to profitably reinvest capital.

The Bottom Line On Grupo Bimbo. de's ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Grupo Bimbo. de has. Since the stock has returned a staggering 125% to shareholders over the last five years, it looks like investors are recognizing these changes. 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 final note, we found 2 warning signs for Grupo Bimbo. de (1 makes us a bit uncomfortable) you should be aware of.

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.