Under The Bonnet, Coca-Cola Consolidated's (NASDAQ:COKE) Returns Look Impressive

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. And in light of that, the trends we're seeing at Coca-Cola Consolidated's (NASDAQ:COKE) look very promising so lets take a look.

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

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on Coca-Cola Consolidated is:

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

0.25 = US$839m ÷ (US$4.3b - US$918m) (Based on the trailing twelve months to March 2024).

Thus, Coca-Cola Consolidated has an ROCE of 25%. In absolute terms that's a great return and it's even better than the Beverage industry average of 17%.

See our latest analysis for Coca-Cola Consolidated

Historical performance is a great place to start when researching a stock so above you can see the gauge for Coca-Cola Consolidated's ROCE against it's prior returns. If you'd like to look at how Coca-Cola Consolidated has performed in the past in other metrics, you can view this free graph of Coca-Cola Consolidated's past earnings, revenue and cash flow.

What Can We Tell From Coca-Cola Consolidated's ROCE Trend?

The trends we've noticed at Coca-Cola Consolidated are quite reassuring. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 25%. The amount of capital employed has increased too, by 34%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

What We Can Learn From Coca-Cola Consolidated's ROCE

In summary, it's great to see that Coca-Cola Consolidated can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. Since the stock has returned a staggering 256% to shareholders over the last five years, it looks like investors are recognizing these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

Like most companies, Coca-Cola Consolidated does come with some risks, and we've found 1 warning sign that you should be aware of.

High returns are a key ingredient to strong performance, so check out our free list ofstocks earning high returns on equity with solid balance sheets.

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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.