Shareholders Would Enjoy A Repeat Of Kimberly-Clark de México S. A. B. de C. V's (BMV:KIMBERA) Recent Growth In Returns

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. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. With that in mind, the ROCE of Kimberly-Clark de México S. A. B. de C. V (BMV:KIMBERA) looks great, so lets see what the trend can tell us.

What Is Return On Capital Employed (ROCE)?

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. 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)

0.34 = Mex$12b ÷ (Mex$54b - Mex$19b) (Based on the trailing twelve months to December 2023).

So, Kimberly-Clark de México S. A. B. de C. V has an ROCE of 34%. In absolute terms that's a great return and it's even better than the Household Products industry average of 11%.

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

In the above chart we have measured Kimberly-Clark de México S. A. B. de C. V's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Kimberly-Clark de México S. A. B. de C. V .

So How Is Kimberly-Clark de México S. A. B. de C. V's ROCE Trending?

Kimberly-Clark de México S. A. B. de C. V's ROCE growth is quite impressive. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 40% in that same time. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. It's worth looking deeper into this though because while it's great that the business is more efficient, it might also mean that going forward the areas to invest internally for the organic growth are lacking.

The Bottom Line

In summary, we're delighted to see that Kimberly-Clark de México S. A. B. de C. V has been able to increase efficiencies and earn higher rates of return on the same amount of capital. Since the stock has returned a solid 43% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

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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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.