Did you know there are some financial metrics that can provide clues of a potential multi-bagger? 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. In light of that, when we looked at Becle. de (BMV:CUERVO) and its ROCE trend, we weren't exactly thrilled.
Understanding Return On Capital Employed (ROCE)
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 Becle. de:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.074 = Mex$6.6b ÷ (Mex$104b - Mex$14b) (Based on the trailing twelve months to June 2024).
So, Becle. de has an ROCE of 7.4%. In absolute terms, that's a low return and it also under-performs the Beverage industry average of 10%.
See our latest analysis for Becle. de
Above you can see how the current ROCE for Becle. 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 analyst report for Becle. de .
What The Trend Of ROCE Can Tell Us
There are better returns on capital out there than what we're seeing at Becle. de. Over the past five years, ROCE has remained relatively flat at around 7.4% and the business has deployed 44% more capital into its operations. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.
Our Take On Becle. de's ROCE
In summary, Becle. de has simply been reinvesting capital and generating the same low rate of return as before. Unsurprisingly, the stock has only gained 9.2% over the last five years, which potentially indicates that investors are accounting for this going forward. So if you're looking for a multi-bagger, the underlying trends indicate you may have better chances elsewhere.
Becle. de does have some risks though, and we've spotted 1 warning sign for Becle. de that you might be interested in.
While Becle. 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.
Valuation is complex, but we're here to simplify it.
Discover if Becle. de might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.
Access Free AnalysisHave feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
About BMV:CUERVO *
Becle. de
Manufactures and distributes spirits and other distilled beverages in Mexico, the United States, Canada, and internationally.
Solid track record with excellent balance sheet.
