G. Willi-Food International's (NASDAQ:WILC) Returns On Capital Are Heading Higher
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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So on that note, G. Willi-Food International (NASDAQ:WILC) looks quite promising in regards to its trends of return on capital.
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 G. Willi-Food International is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.089 = ₪49m ÷ (₪622m - ₪75m) (Based on the trailing twelve months to March 2023).
Therefore, G. Willi-Food International has an ROCE of 8.9%. On its own, that's a low figure but it's around the 10% average generated by the Consumer Retailing industry.
View our latest analysis for G. Willi-Food International
Historical performance is a great place to start when researching a stock so above you can see the gauge for G. Willi-Food International's ROCE against it's prior returns. If you'd like to look at how G. Willi-Food International has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.
What Can We Tell From G. Willi-Food International's ROCE Trend?
Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 8.9%. Basically the business is earning more per dollar of capital invested and in addition to that, 29% more capital is being employed now too. So we're very much inspired by what we're seeing at G. Willi-Food International thanks to its ability to profitably reinvest capital.
The Key Takeaway
To sum it up, G. Willi-Food International has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And with a respectable 99% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.
On a separate note, we've found 2 warning signs for G. Willi-Food International you'll probably want to know about.
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.
