Grupo Bimbo. de (BMV:BIMBOA) Is Doing The Right Things To Multiply Its Share Price

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So on that note, Grupo Bimbo. de (BMV:BIMBOA) looks quite promising in regards to its trends of return on capital.

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 Grupo Bimbo. de is:

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

0.14 = Mex$34b ÷ (Mex$326b - Mex$77b) (Based on the trailing twelve months to September 2021).

Therefore, Grupo Bimbo. de has an ROCE of 14%. In absolute terms, that's a satisfactory return, but compared to the Food industry average of 10% it's much better.

Check out 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, you can check out the forecasts from the analysts covering Grupo Bimbo. de here for free.

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

Grupo Bimbo. de is displaying some positive trends. Over the last five years, returns on capital employed have risen substantially to 14%. Basically the business is earning more per dollar of capital invested and in addition to that, 29% more capital is being employed now too. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

The Bottom Line

To sum it up, Grupo Bimbo. de has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 56% return over the last five years. In light of that, we think it's worth looking further into this stock because if Grupo Bimbo. de can keep these trends up, it could have a bright future ahead.

One more thing, we've spotted 1 warning sign facing Grupo Bimbo. de that you might find interesting.

While Grupo Bimbo. 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.