Wellard (ASX:WLD) Shareholders Will Want The ROCE Trajectory To Continue

There are a few key trends to look for if we want to identify the next multi-bagger. 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. So on that note, Wellard (ASX:WLD) looks quite promising in regards to its trends of return on capital.

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What Is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Wellard, this is the formula:

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

0.067 = US$2.1m ÷ (US$34m - US$2.7m) (Based on the trailing twelve months to June 2025).

Therefore, Wellard has an ROCE of 6.7%. In absolute terms, that's a low return and it also under-performs the Food industry average of 10%.

Check out our latest analysis for Wellard

Historical performance is a great place to start when researching a stock so above you can see the gauge for Wellard's ROCE against it's prior returns. If you'd like to look at how Wellard has performed in the past in other metrics, you can view this free graph of Wellard's past earnings, revenue and cash flow.

What The Trend Of ROCE Can Tell Us

Like most people, we're pleased that Wellard is now generating some pretax earnings. Historically the company was generating losses but as we can see from the latest figures referenced above, they're now earning 6.7% on their capital employed. Additionally, the business is utilizing 38% less capital than it was five years ago, and taken at face value, that can mean the company needs less funds at work to get a return. Wellard could be selling under-performing assets since the ROCE is improving.

In another part of our analysis, we noticed that the company's ratio of current liabilities to total assets decreased to 7.8%, which broadly means the business is relying less on its suppliers or short-term creditors to fund its operations. This tells us that Wellard has grown its returns without a reliance on increasing their current liabilities, which we're very happy with.

In Conclusion...

In summary, it's great to see that Wellard has been able to turn things around and earn higher returns on lower amounts of capital. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. 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.

If you want to know some of the risks facing Wellard we've found 5 warning signs (4 shouldn't be ignored!) that you should be aware of before investing here.

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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.