Returns At Willy-Food Investments (TLV:WLFD) Are On The Way Up

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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Speaking of which, we noticed some great changes in Willy-Food Investments' (TLV:WLFD) returns on capital, so let's have a look.

Return On Capital Employed (ROCE): What Is It?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Willy-Food Investments:

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

0.088 = ₪48m ÷ (₪628m - ₪83m) (Based on the trailing twelve months to March 2023).

Thus, Willy-Food Investments has an ROCE of 8.8%. On its own that's a low return on capital but it's in line with the industry's average returns of 8.6%.

View our latest analysis for Willy-Food Investments

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how Willy-Food Investments has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

How Are Returns Trending?

We're glad to see that ROCE is heading in the right direction, even if it is still low at the moment. The data shows that returns on capital have increased substantially over the last five years to 8.8%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 28%. So we're very much inspired by what we're seeing at Willy-Food Investments thanks to its ability to profitably reinvest capital.

In Conclusion...

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Willy-Food Investments has. Investors may not be impressed by the favorable underlying trends yet because over the last five years the stock has only returned 19% to shareholders. So with that in mind, we think the stock deserves further research.

Willy-Food Investments does have some risks, we noticed 3 warning signs (and 2 which are significant) we think you should know about.

While Willy-Food Investments isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.