Here's What To Make Of Empire's (TSE:EMP.A) Decelerating Rates Of Return

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. However, after investigating Empire (TSE:EMP.A), we don't think it's current trends fit the mold of a multi-bagger.

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Understanding 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. To calculate this metric for Empire, this is the formula:

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

0.099 = CA$1.3b ÷ (CA$17b - CA$4.0b) (Based on the trailing twelve months to August 2025).

Thus, Empire has an ROCE of 9.9%. In absolute terms, that's a low return and it also under-performs the Consumer Retailing industry average of 12%.

View our latest analysis for Empire

Above you can see how the current ROCE for Empire 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 Empire for free.

What The Trend Of ROCE Can Tell Us

The returns on capital haven't changed much for Empire in recent years. The company has employed 21% more capital in the last five years, and the returns on that capital have remained stable at 9.9%. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

The Key Takeaway

In summary, Empire has simply been reinvesting capital and generating the same low rate of return as before. Unsurprisingly, the stock has only gained 37% over the last five years, which potentially indicates that investors are accounting for this going forward. So if you're looking for a multi-bagger, the underlying trends indicate you may have better chances elsewhere.

Like most companies, Empire does come with some risks, and we've found 1 warning sign that you should be aware of.

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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.