Yahoo Finance Coca-Cola FEMSA. de (NYSE:KOF) Has Some Way To Go To Become A Multi-Bagger
Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's 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 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 satisfactory return, but compared to the Beverage industry average of 8.7% it's much better.
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.
What Does the ROCE Trend For Coca-Cola FEMSA. de Tell Us?
Things have been pretty stable at Coca-Cola FEMSA. de, with its capital employed and returns on that capital staying somewhat the same for the last five years. It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. 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.
The Key Takeaway
In a nutshell, Coca-Cola FEMSA. de has been trudging along with the same returns from the same amount of capital over the last five years. Since the stock has declined 11% over the last five years, investors may not be too optimistic on this trend improving either. Therefore based on the analysis done in this article, we don't think Coca-Cola FEMSA. de has the makings of a multi-bagger.
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.
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.
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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.
