Fox-Wizel (TLV:FOX) Is Experiencing Growth In Returns On Capital

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, 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. So when we looked at Fox-Wizel (TLV:FOX) and its trend of ROCE, we really liked what we saw.

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. To calculate this metric for Fox-Wizel, this is the formula:

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

0.10 = ₪416m ÷ (₪5.7b - ₪1.6b) (Based on the trailing twelve months to June 2021).

Thus, Fox-Wizel has an ROCE of 10%. That's a relatively normal return on capital, and it's around the 12% generated by the Specialty Retail industry.

See our latest analysis for Fox-Wizel

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

What Can We Tell From Fox-Wizel's ROCE Trend?

Fox-Wizel is displaying some positive trends. The data shows that returns on capital have increased substantially over the last five years to 10%. The amount of capital employed has increased too, by 312%. So we're very much inspired by what we're seeing at Fox-Wizel thanks to its ability to profitably reinvest capital.

The Key Takeaway

To sum it up, Fox-Wizel has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. Therefore, we think it would be worth your time to check if these trends are going to continue.

On a final note, we've found 2 warning signs for Fox-Wizel that we think you should be aware of.

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

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.