We Like These Underlying Trends At Willy-Food Investments (TLV:WLFD)

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount 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. With that in mind, we've noticed some promising trends at Willy-Food Investments (TLV:WLFD) so let's look a bit deeper.

What is Return On Capital Employed (ROCE)?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the 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)

0.11 = ₪61m ÷ (₪615m - ₪41m) (Based on the trailing twelve months to September 2020).

Therefore, Willy-Food Investments has an ROCE of 11%. That's a pretty standard return and it's in line with the industry average of 11%.

See our latest analysis for Willy-Food Investments

Historical performance is a great place to start when researching a stock so above you can see the gauge for Willy-Food Investments' ROCE against it's prior returns. If you're interested in investigating Willy-Food Investments' past further, check out this free graph of past earnings, revenue and cash flow.

The Trend Of ROCE

We like the trends that we're seeing from Willy-Food Investments. The data shows that returns on capital have increased substantially over the last five years to 11%. The amount of capital employed has increased too, by 35%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

The Key Takeaway

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. Since the stock has returned a staggering 237% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if Willy-Food Investments can keep these trends up, it could have a bright future ahead.

If you'd like to know about the risks facing Willy-Food Investments, we've discovered 1 warning sign that you should be aware of.

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. 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.
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