There Are Reasons To Feel Uneasy About Organización Soriana S. A. B. de C. V's (BMV:SORIANAB) Returns On Capital
What are the early trends we should look for to identify a stock that could multiply in value over the long term? 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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. However, after briefly looking over the numbers, we don't think Organización Soriana S. A. B. de C. V (BMV:SORIANAB) has the makings of a multi-bagger going forward, but let's have a look at why that may be.
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. Analysts use this formula to calculate it for Organización Soriana S. A. B. de C. V:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.068 = Mex$8.1b ÷ (Mex$158b - Mex$38b) (Based on the trailing twelve months to September 2025).
So, Organización Soriana S. A. B. de C. V has an ROCE of 6.8%. In absolute terms, that's a low return and it also under-performs the Consumer Retailing industry average of 19%.
Check out our latest analysis for Organización Soriana S. A. B. de C. V
In the above chart we have measured Organización Soriana S. A. B. de C. V'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 Organización Soriana S. A. B. de C. V for free.
What Does the ROCE Trend For Organización Soriana S. A. B. de C. V Tell Us?
On the surface, the trend of ROCE at Organización Soriana S. A. B. de C. V doesn't inspire confidence. Around five years ago the returns on capital were 9.4%, but since then they've fallen to 6.8%. However it looks like Organización Soriana S. A. B. de C. V might be reinvesting for long term growth because while capital employed has increased, the company's sales haven't changed much in the last 12 months. It's worth keeping an eye on the company's earnings from here on to see if these investments do end up contributing to the bottom line.
What We Can Learn From Organización Soriana S. A. B. de C. V's ROCE
In summary, Organización Soriana S. A. B. de C. V is reinvesting funds back into the business for growth but unfortunately it looks like sales haven't increased much just yet. Investors must think there's better things to come because the stock has knocked it out of the park, delivering a 116% gain to shareholders who have held over the last five years. But if the trajectory of these underlying trends continue, we think the likelihood of it being a multi-bagger from here isn't high.
Organización Soriana S. A. B. de C. V does come with some risks though, we found 2 warning signs in our investment analysis, and 1 of those is a bit concerning...
For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high 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.