Returns On Capital At Grupo Bimbo. de (BMV:BIMBOA) Have Hit The Brakes

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, the ROCE of Grupo Bimbo. de (BMV:BIMBOA) looks decent, right now, so lets see what the trend of returns can tell us.

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. 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)

0.14 = Mex$37b ÷ (Mex$354b - Mex$89b) (Based on the trailing twelve months to September 2022).

Therefore, Grupo Bimbo. de has an ROCE of 14%. On its own, that's a standard return, however it's much better than the 11% generated by the Food industry.

See our latest analysis for Grupo Bimbo. de

Above you can see how the current ROCE for Grupo Bimbo. de compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Grupo Bimbo. de.

What Can We Tell From Grupo Bimbo. de's ROCE Trend?

While the returns on capital are good, they haven't moved much. The company has employed 50% more capital in the last five years, and the returns on that capital have remained stable at 14%. Since 14% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

The Bottom Line On Grupo Bimbo. de's ROCE

The main thing to remember is that Grupo Bimbo. de has proven its ability to continually reinvest at respectable rates of return. And long term investors would be thrilled with the 110% return they've received over the last five years. So even though the stock might be more "expensive" than it was before, we think the strong fundamentals warrant this stock for further research.

If you want to continue researching Grupo Bimbo. de, you might be interested to know about the 2 warning signs that our analysis has discovered.

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.