If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Although, when we looked at Budweiser Brewing Company APAC (HKG:1876), 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. Analysts use this formula to calculate it for Budweiser Brewing Company APAC:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.10 = US$1.1b ÷ (US$15b - US$3.9b) (Based on the trailing twelve months to December 2024).

Therefore, Budweiser Brewing Company APAC has an ROCE of 10%. In absolute terms, that's a pretty standard return but compared to the Beverage industry average it falls behind.

View our latest analysis for Budweiser Brewing Company APAC

Above you can see how the current ROCE for Budweiser Brewing Company APAC 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 Budweiser Brewing Company APAC for free.

How Are Returns Trending?

Things have been pretty stable at Budweiser Brewing Company APAC, 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. So don't be surprised if Budweiser Brewing Company APAC doesn't end up being a multi-bagger in a few years time. That being the case, it makes sense that Budweiser Brewing Company APAC has been paying out 86% of its earnings to its shareholders. If the company is in fact lacking growth opportunities, that's one of the viable alternatives for the money.

Our Take On Budweiser Brewing Company APAC's ROCE

In summary, Budweiser Brewing Company APAC isn't compounding its earnings but is generating stable returns on the same amount of capital employed. And in the last five years, the stock has given away 52% so the market doesn't look too hopeful on these trends strengthening any time soon. Therefore based on the analysis done in this article, we don't think Budweiser Brewing Company APAC has the makings of a multi-bagger.

One more thing to note, we've identified 1 warning sign with Budweiser Brewing Company APAC and understanding this should be part of your investment process.

While Budweiser Brewing Company APAC may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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.