The Returns At Coca-Cola FEMSA. de (NYSE:KOF) Aren't Growing

If you're looking for a multi-bagger, there's a few things to keep an eye out for. 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. However, after investigating Coca-Cola FEMSA. de (NYSE:KOF), we don't think it's current trends fit the mold of a multi-bagger.

What is Return On Capital Employed (ROCE)?

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 FEMSA. de is:

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

0.12 = Mex$28b ÷ (Mex$284b - Mex$61b) (Based on the trailing twelve months to March 2022).

So, Coca-Cola FEMSA. de has an ROCE of 12%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Beverage industry average of 13%.

Check out 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're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

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

There hasn't been much to report for Coca-Cola FEMSA. de'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. With that in mind, unless investment picks up again in the future, we wouldn't expect Coca-Cola FEMSA. de to be a multi-bagger going forward. That probably explains why Coca-Cola FEMSA. de has been paying out 66% of its earnings as dividends to shareholders. These mature businesses typically have reliable earnings and not many places to reinvest them, so the next best option is to put the earnings into shareholders pockets.

In Conclusion...

We can conclude that in regards to Coca-Cola FEMSA. de'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 18% so the market doesn't look too hopeful on these trends strengthening any time soon. On the whole, we aren't too inspired by the underlying trends and we think there may be better chances of finding a multi-bagger elsewhere.

If you're still interested in Coca-Cola FEMSA. de it's worth checking out our FREE intrinsic value approximation to see if it's trading at an attractive price in other respects.

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. 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.