Is Organización Cultiba. de (BMV:CULTIBAB) A Future Multi-bagger?

There are a few key trends to look for if we want to identify the next multi-bagger. 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. So on that note, Organización Cultiba. de (BMV:CULTIBAB) looks quite promising in regards to its trends of return on capital.

What is 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. To calculate this metric for Organización Cultiba. de, this is the formula:

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

0.032 = Mex$552m ÷ (Mex$21b - Mex$3.5b) (Based on the trailing twelve months to December 2020).

Therefore, Organización Cultiba. de has an ROCE of 3.2%. Ultimately, that's a low return and it under-performs the Beverage industry average of 11%.

View our latest analysis for Organización Cultiba. de

Historical performance is a great place to start when researching a stock so above you can see the gauge for Organización Cultiba. de's ROCE against it's prior returns. If you'd like to look at how Organización Cultiba. de has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

What Does the ROCE Trend For Organización Cultiba. de Tell Us?

Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. The figures show that over the last five years, returns on capital have grown by 387%. The company is now earning Mex$0.03 per dollar of capital employed. In regards to capital employed, Organización Cultiba. de appears to been achieving more with less, since the business is using 23% less capital to run its operation. Organización Cultiba. de may be selling some assets so it's worth investigating if the business has plans for future investments to increase returns further still.

The Bottom Line

In the end, Organización Cultiba. de has proven it's capital allocation skills are good with those higher returns from less amount of capital. And since the stock has fallen 17% over the last five years, there might be an opportunity here. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

If you want to continue researching Organización Cultiba. de, you might be interested to know about the 1 warning sign that our analysis has discovered.

While Organización Cultiba. 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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