Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So when we looked at Shufersal (TLV:SAE) and its trend of ROCE, we really liked what we saw.
Return On Capital Employed (ROCE): What Is It?
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 Shufersal is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.10 = ₪1.0b ÷ (₪15b - ₪4.8b) (Based on the trailing twelve months to June 2025).
So, Shufersal has an ROCE of 10.0%. In absolute terms, that's a low return but it's around the Consumer Retailing industry average of 11%.
View our latest analysis for Shufersal
Historical performance is a great place to start when researching a stock so above you can see the gauge for Shufersal's ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Shufersal.
What The Trend Of ROCE Can Tell Us
Shufersal is showing promise given that its ROCE is trending up and to the right. The figures show that over the last five years, ROCE has grown 49% whilst employing roughly the same amount of capital. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.
The Bottom Line
In summary, we're delighted to see that Shufersal has been able to increase efficiencies and earn higher rates of return on the same amount of capital. Since the stock has returned a solid 74% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. 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 1 warning sign for Shufersal you'll probably want to know about.
For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high 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.