Here's What To Make Of Coca-Cola FEMSA. de's (NYSE:KOF) Returns On Capital

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. With that in mind, the ROCE of Coca-Cola FEMSA. de (NYSE:KOF) looks decent, right now, so lets see what the trend of returns can tell us.

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 Coca-Cola FEMSA. de, this is the formula:

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

0.10 = Mex$23b ÷ (Mex$284b - Mex$57b) (Based on the trailing twelve months to September 2020).

Therefore, Coca-Cola FEMSA. de has an ROCE of 10.0%. In absolute terms, that's a pretty standard return but compared to the Beverage industry average it falls behind.

See our latest analysis for Coca-Cola FEMSA. de

In the above chart we have measured Coca-Cola FEMSA. de's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Coca-Cola FEMSA. de here for free.

So How Is Coca-Cola FEMSA. de's ROCE Trending?

The trend of ROCE doesn't stand out much, but returns on a whole are decent. The company has consistently earned 10.0% for the last five years, and the capital employed within the business has risen 26% in that time. 10.0% is a pretty standard return, and it provides some comfort knowing that Coca-Cola FEMSA. de has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

Our Take On Coca-Cola FEMSA. de's ROCE

To sum it up, Coca-Cola FEMSA. de has simply been reinvesting capital steadily, at those decent rates of return. Yet over the last five years the stock has declined 27%, so the decline might provide an opening. For that reason, savvy investors might want to look further into this company in case it's a prime investment.

One more thing, we've spotted 2 warning signs facing Coca-Cola FEMSA. de that you might find interesting.

While Coca-Cola FEMSA. 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. 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.
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