Investors Met With Slowing Returns on Capital At Kimberly-Clark de México S. A. B. de C. V (BMV:KIMBERA)

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So when we looked at Kimberly-Clark de México S. A. B. de C. V (BMV:KIMBERA), they do have a high ROCE, but we weren't exactly elated from how returns are trending.

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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. 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)

0.46 = Mex$12b ÷ (Mex$48b - Mex$21b) (Based on the trailing twelve months to March 2025).

So, Kimberly-Clark de México S. A. B. de C. V has an ROCE of 46%. In absolute terms that's a great return and it's even better than the Household Products industry average of 12%.

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, you can check out the forecasts from the analysts covering Kimberly-Clark de México S. A. B. de C. V for free.

The Trend Of ROCE

There hasn't been much to report for Kimberly-Clark de México S. A. B. de C. V's returns and its level of capital employed because both metrics have been steady for the past five years. It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. Although current returns are high, we'd need more evidence of underlying growth for it to look like a multi-bagger going forward. That being the case, it makes sense that Kimberly-Clark de México S. A. B. de C. V has been paying out 85% of its earnings to its shareholders. If the company is in fact lacking growth opportunities, that's one of the viable alternatives for the money.

Another thing to note, Kimberly-Clark de México S. A. B. de C. V has a high ratio of current liabilities to total assets of 44%. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. Ideally we'd like to see this reduce as that would mean fewer obligations bearing risks.

The Bottom Line On Kimberly-Clark de México S. A. B. de C. V's ROCE

While Kimberly-Clark de México S. A. B. de C. V has impressive profitability from its capital, it isn't increasing that amount of capital. Unsurprisingly, the stock has only gained 37% 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.

Kimberly-Clark de México S. A. B. de C. V does have some risks though, and we've spotted 1 warning sign for Kimberly-Clark de México S. A. B. de C. V that you might be interested in.

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.