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What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base 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. Although, when we looked at Heineken Holding (AMS:HEIO), it didn't seem to tick all of these boxes.
What Is Return On Capital Employed (ROCE)?
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 Heineken Holding is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.099 = €3.9b ÷ (€53b - €14b) (Based on the trailing twelve months to December 2024).
Thus, Heineken Holding has an ROCE of 9.9%. In absolute terms, that's a low return but it's around the Beverage industry average of 11%.
Check out our latest analysis for Heineken Holding
Above you can see how the current ROCE for Heineken Holding compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Heineken Holding .
What The Trend Of ROCE Can Tell Us
Things have been pretty stable at Heineken Holding, with its capital employed and returns on that capital staying somewhat the same for the last 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 Heineken Holding to be a multi-bagger going forward.
In Conclusion...
In summary, Heineken Holding isn't compounding its earnings but is generating stable returns on the same amount of capital employed. Additionally, the stock's total return to shareholders over the last five years has been flat, which isn't too surprising. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere.
Like most companies, Heineken Holding does come with some risks, and we've found 3 warning signs that you should be aware of.