The Trend Of High Returns At Kimberly-Clark de México S. A. B. de C. V (BMV:KIMBERA) Has Us Very Interested

There are a few key trends to look for if we want to identify the next multi-bagger. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. 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 the ROCE trend of Kimberly-Clark de México S. A. B. de C. V (BMV:KIMBERA) we really liked what we saw.

Understanding 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$11b ÷ (Mex$54b - Mex$21b) (Based on the trailing twelve months to September 2023).

So, Kimberly-Clark de México S. A. B. de C. V has an ROCE of 34%. That's a fantastic return and not only that, it outpaces the average of 10% earned by companies in a similar industry.

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

Kimberly-Clark de México S. A. B. de C. V has not disappointed with their ROCE growth. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 29% over the last five years. 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

As discussed above, Kimberly-Clark de México S. A. B. de C. V appears to be getting more proficient at generating returns since capital employed has remained flat but earnings (before interest and tax) are up. And with a respectable 56% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. In light of that, we think it's worth looking further into this stock because if Kimberly-Clark de México S. A. B. de C. V can keep these trends up, it could have a bright future ahead.

If you want to continue researching Kimberly-Clark de México S. A. B. de C. V, you might be interested to know about the 2 warning signs that our analysis has discovered.

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.