To find a multi-bagger stock, what are the underlying trends we should look for in a business? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing 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. Speaking of which, we noticed some great changes in Coca-Cola FEMSA. de's (NYSE:KOF) returns on capital, so let's have a look.

Understanding Return On Capital Employed (ROCE)

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its 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)

0.17 = Mex$41b ÷ (Mex$308b - Mex$67b) (Based on the trailing twelve months to December 2024).

Therefore, Coca-Cola FEMSA. de has an ROCE of 17%. By itself that's a normal return on capital and it's in line with the industry's average returns of 17%.

Check out our latest analysis for Coca-Cola FEMSA. de NYSE:KOF Return on Capital Employed March 17th 2025

Above you can see how the current ROCE for Coca-Cola FEMSA. de compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Coca-Cola FEMSA. de  for free.

What Can We Tell From Coca-Cola FEMSA. de's ROCE Trend?

Coca-Cola FEMSA. de's ROCE growth is quite impressive. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 33% in that same time. 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. It's worth looking deeper into this though because while it's great that the business is more efficient, it might also mean that going forward the areas to invest internally for the organic growth are lacking.

The Bottom Line On Coca-Cola FEMSA. de's ROCE

In summary, we're delighted to see that Coca-Cola FEMSA. de has been able to increase efficiencies and earn higher rates of return on the same amount of capital. Since the stock has returned a staggering 188% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if Coca-Cola FEMSA. de can keep these trends up, it could have a bright future ahead.

Story Continues

On the other side of ROCE, we have to consider valuation. That's why we have a FREE intrinsic value estimation for KOF on our platform that is definitely worth checking out.

If you want to search for solid companies with great earnings, check out this freelist 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.

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