Yahoo Finance Mondelez International (NASDAQ:MDLZ) Shareholders Will Want The ROCE Trajectory To Continue
There are a few key trends to look for if we want to identify the next multi-bagger. 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So when we looked at Mondelez International (NASDAQ:MDLZ) and its trend of ROCE, we really liked what we saw.
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. The formula for this calculation on Mondelez International is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.14 = US$7.2b ÷ (US$78b - US$25b) (Based on the trailing twelve months to March 2024).
Therefore, Mondelez International has an ROCE of 14%. In absolute terms, that's a satisfactory return, but compared to the Food industry average of 11% it's much better.
See our latest analysis for Mondelez International
In the above chart we have measured Mondelez International'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 analyst report for Mondelez International .
What Does the ROCE Trend For Mondelez International Tell Us?
Mondelez International has not disappointed with their ROCE growth. The figures show that over the last five years, ROCE has grown 79% whilst employing roughly the same amount of capital. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.
What We Can Learn From Mondelez International's ROCE
To bring it all together, Mondelez International has done well to increase the returns it's generating from its capital employed. And with a respectable 51% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. In light of that, we think it's worth looking further into this stock because if Mondelez International can keep these trends up, it could have a bright future ahead.
Like most companies, Mondelez International does come with some risks, and we've found 1 warning sign that you should be aware of.
If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
