América Móvil. de (BMV:AMXB) Has Some Way To Go To Become A Multi-Bagger

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. That's why when we briefly looked at América Móvil. de's (BMV:AMXB) ROCE trend, we were pretty happy with what we saw.

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Return On Capital Employed (ROCE): What Is It?

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 América Móvil. de, this is the formula:

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

0.14 = Mex$180b ÷ (Mex$1.8t - Mex$503b) (Based on the trailing twelve months to December 2024).

So, América Móvil. de has an ROCE of 14%. That's a relatively normal return on capital, and it's around the 12% generated by the Wireless Telecom industry.

See our latest analysis for América Móvil. de

Above you can see how the current ROCE for América Móvil. de 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 analyst report for América Móvil. de .

What Does the ROCE Trend For América Móvil. de Tell Us?

While the returns on capital are good, they haven't moved much. The company has employed 29% more capital in the last five years, and the returns on that capital have remained stable at 14%. Since 14% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

Our Take On América Móvil. de's ROCE

The main thing to remember is that América Móvil. de has proven its ability to continually reinvest at respectable rates of return. In light of this, the stock has only gained 33% over the last five years for shareholders who have owned the stock in this period. So to determine if América Móvil. de is a multi-bagger going forward, we'd suggest digging deeper into the company's other fundamentals.

One more thing to note, we've identified 3 warning signs with América Móvil. de and understanding these should be part of your investment process.

While América Móvil. de may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list 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.