Heineken Holding (AMS:HEIO) Hasn't Managed To Accelerate Its Returns

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing 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 Heineken Holding (AMS:HEIO), we don't think it's current trends fit the mold of a multi-bagger.

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 Heineken Holding, this is the formula:

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

0.10 = €4.1b ÷ (€54b - €15b) (Based on the trailing twelve months to June 2024).

Therefore, Heineken Holding has an ROCE of 10%. By itself that's a normal return on capital and it's in line with the industry's average returns of 10%.

Check out our latest analysis for Heineken Holding

Historical performance is a great place to start when researching a stock so above you can see the gauge for Heineken Holding's ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Heineken Holding.

How Are Returns Trending?

Things have been pretty stable at Heineken Holding, with its capital employed and returns on that capital staying somewhat the same for the last five years. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. So don't be surprised if Heineken Holding doesn't end up being a multi-bagger in a few years time.

In Conclusion...

We can conclude that in regards to Heineken Holding'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 26% so the market doesn't look too hopeful on these trends strengthening any time soon. Therefore based on the analysis done in this article, we don't think Heineken Holding has the makings of a multi-bagger.

One more thing, we've spotted 4 warning signs facing Heineken Holding that you might find interesting.

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.