Here's What Kimberly-Clark de México S. A. B. de C. V's (BMV:KIMBERA) Strong Returns On Capital Mean

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing 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. 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.

What is Return On Capital Employed (ROCE)?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for Kimberly-Clark de México S. A. B. de C. V, this is the formula:

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

0.31 = Mex$10.0b ÷ (Mex$50b - Mex$18b) (Based on the trailing twelve months to June 2021).

So, Kimberly-Clark de México S. A. B. de C. V has an ROCE of 31%. In absolute terms that's a great return and it's even better than the Household Products industry average of 16%.

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're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

The Trend Of ROCE

We'd be pretty happy with returns on capital like Kimberly-Clark de México S. A. B. de C. V. The company has consistently earned 31% for the last five years, and the capital employed within the business has risen 27% in that time. With returns that high, it's great that the business can continually reinvest its money at such appealing rates of return. 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 summary, we're delighted to see that Kimberly-Clark de México S. A. B. de C. V has been compounding returns by reinvesting at consistently high rates of return, as these are common traits of a multi-bagger. Despite the good fundamentals, total returns from the stock have been virtually flat over the last five years. That's why we think it'd be worthwhile to look further into this stock given the fundamentals are appealing.

Like most companies, Kimberly-Clark de México S. A. B. de C. V does come with some risks, and we've found 2 warning signs that you should be aware of.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.

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