Return Trends At Fomento Económico Mexicano. de (BMV:FEMSAUBD) Aren't Appealing

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. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. However, after investigating Fomento Económico Mexicano. de (BMV:FEMSAUBD), we don't think it's current trends fit the mold of a multi-bagger.

Understanding 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. The formula for this calculation on Fomento Económico Mexicano. de is:

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

0.088 = Mex$55b ÷ (Mex$806b - Mex$182b) (Based on the trailing twelve months to December 2023).

So, Fomento Económico Mexicano. de has an ROCE of 8.8%. In absolute terms, that's a low return and it also under-performs the Beverage industry average of 13%.

Check out our latest analysis for Fomento Económico Mexicano. de

Above you can see how the current ROCE for Fomento Económico Mexicano. de compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Fomento Económico Mexicano. de .

What Does the ROCE Trend For Fomento Económico Mexicano. de Tell Us?

The returns on capital haven't changed much for Fomento Económico Mexicano. de in recent years. The company has employed 31% more capital in the last five years, and the returns on that capital have remained stable at 8.8%. 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.

The Key Takeaway

Long story short, while Fomento Económico Mexicano. de has been reinvesting its capital, the returns that it's generating haven't increased. Unsurprisingly, the stock has only gained 26% 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.

Fomento Económico Mexicano. de could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation for FEMSA UBD on our platform quite valuable.

While Fomento Económico Mexicano. de isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.