Kimberly-Clark de México S. A. B. de C. V (BMV:KIMBERA) Looks To Prolong Its Impressive Returns

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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. With that in mind, the ROCE of Kimberly-Clark de México S. A. B. de C. V (BMV:KIMBERA) looks attractive right now, so lets see what the trend of returns can tell us.

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. 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)

0.21 = Mex$8.1b ÷ (Mex$55b - Mex$17b) (Based on the trailing twelve months to September 2022).

So, Kimberly-Clark de México S. A. B. de C. V has an ROCE of 21%. In absolute terms that's a great return and it's even better than the Household Products industry average of 9.2%.

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.

What The Trend Of ROCE Can Tell Us

It's hard not to be impressed by Kimberly-Clark de México S. A. B. de C. V's returns on capital. The company has employed 39% more capital in the last five years, and the returns on that capital have remained stable at 21%. Returns like this are the envy of most businesses and given it has repeatedly reinvested at these rates, that's even better. If these trends can continue, it wouldn't surprise us if the company became a multi-bagger.

In Conclusion...

Kimberly-Clark de México S. A. B. de C. V has demonstrated its proficiency by generating high returns on increasing amounts of capital employed, which we're thrilled about. And given the stock has only risen 30% over the last five years, we'd suspect the market is beginning to recognize these trends. 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.

One final note, you should learn about the 2 warning signs we've spotted with Kimberly-Clark de México S. A. B. de C. V (including 1 which shouldn't be ignored) .

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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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.