Grupo Gigante S. A. B. de C. V (BMV:GIGANTE) Hasn't Managed To Accelerate Its 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. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount 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. However, after investigating Grupo Gigante S. A. B. de C. V (BMV:GIGANTE), we don't think it's current trends fit the mold of a multi-bagger.

What Is Return On Capital Employed (ROCE)?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for Grupo Gigante S. A. B. de C. V:

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

0.082 = Mex$3.3b ÷ (Mex$50b - Mex$9.2b) (Based on the trailing twelve months to December 2022).

Thus, Grupo Gigante S. A. B. de C. V has an ROCE of 8.2%. In absolute terms, that's a low return but it's around the Specialty Retail industry average of 9.1%.

Check out our latest analysis for Grupo Gigante S. A. B. de C. V

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you want to delve into the historical earnings, revenue and cash flow of Grupo Gigante S. A. B. de C. V, check out these free graphs here.

The Trend Of ROCE

There hasn't been much to report for Grupo Gigante 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. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. So don't be surprised if Grupo Gigante S. A. B. de C. V doesn't end up being a multi-bagger in a few years time.

The Key Takeaway

We can conclude that in regards to Grupo Gigante S. A. B. de C. V's returns on capital employed and the trends, there isn't much change to report on. And in the last five years, the stock has given away 38% so the market doesn't look too hopeful on these trends strengthening any time soon. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere.

If you'd like to know about the risks facing Grupo Gigante S. A. B. de C. V, we've discovered 1 warning sign that you should be aware of.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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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.