A Look Into Kimberly-Clark de México S. A. B. de C. V's (BMV:KIMBERA) Impressive Returns On Capital

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. That's why when we briefly looked at Kimberly-Clark de México S. A. B. de C. V's (BMV:KIMBERA) ROCE trend, we were very happy with what we saw.

Return On Capital Employed (ROCE): What Is It?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for Kimberly-Clark de México S. A. B. de C. V:

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

0.23 = Mex$8.9b ÷ (Mex$54b - Mex$15b) (Based on the trailing twelve months to December 2022).

So, Kimberly-Clark de México S. A. B. de C. V has an ROCE of 23%. In absolute terms that's a great return and it's even better than the Household Products industry average of 8.8%.

Check out our latest analysis for Kimberly-Clark de México S. A. B. de C. V

Above you can see how the current ROCE for Kimberly-Clark de México S. A. B. de C. V 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 Kimberly-Clark de México S. A. B. de C. V.

What Can We Tell From Kimberly-Clark de México S. A. B. de C. V's ROCE Trend?

We'd be pretty happy with returns on capital like Kimberly-Clark de México S. A. B. de C. V. Over the past five years, ROCE has remained relatively flat at around 23% and the business has deployed 32% more capital into its operations. Returns like this are the envy of most businesses and given it has repeatedly reinvested at these rates, that's even better. If Kimberly-Clark de México S. A. B. de C. V can keep this up, we'd be very optimistic about its future.

The Bottom Line

In the end, the company has proven it can reinvest it's capital at high rates of returns, which you'll remember is a trait of a multi-bagger. In light of this, the stock has only gained 31% over the last five years for shareholders who have owned the stock in this period. So to determine if Kimberly-Clark de México S. A. B. de C. V is a multi-bagger going forward, we'd suggest digging deeper into the company's other fundamentals.

On a separate note, we've found 2 warning signs for Kimberly-Clark de México S. A. B. de C. V you'll probably want to know about.

Kimberly-Clark de México S. A. B. de C. V is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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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.