The Return Trends At Fox-Wizel (TLV:FOX) Look Promising

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount 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 on that note, Fox-Wizel (TLV:FOX) looks quite promising in regards to its trends of return on capital.

Return On Capital Employed (ROCE): What is it?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for Fox-Wizel:

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

0.13 = ₪564m ÷ (₪6.1b - ₪1.7b) (Based on the trailing twelve months to December 2021).

Therefore, Fox-Wizel has an ROCE of 13%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Specialty Retail industry average of 12%.

View 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 want to delve into the historical earnings, revenue and cash flow of Fox-Wizel, check out these free graphs here.

What Does the ROCE Trend For Fox-Wizel Tell Us?

The trends we've noticed at Fox-Wizel are quite reassuring. Over the last five years, returns on capital employed have risen substantially to 13%. Basically the business is earning more per dollar of capital invested and in addition to that, 343% more capital is being employed now too. So we're very much inspired by what we're seeing at Fox-Wizel thanks to its ability to profitably reinvest capital.

The Bottom Line On Fox-Wizel's ROCE

In summary, it's great to see that Fox-Wizel can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. Since the stock has returned a staggering 585% to shareholders over the last five years, it looks like investors are recognizing these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

On a separate note, we've found 2 warning signs for Fox-Wizel you'll probably want to know about.

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.

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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.