Wilhelmina International (NASDAQ:WHLM) Is Doing The Right Things To Multiply Its Share Price

By
Simply Wall St
Published
May 17, 2022
NasdaqCM:WHLM
Source: Shutterstock

To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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. With that in mind, we've noticed some promising trends at Wilhelmina International (NASDAQ:WHLM) so let's look a bit deeper.

What is Return On Capital Employed (ROCE)?

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 Wilhelmina International:

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

0.12 = US$2.9m ÷ (US$37m - US$12m) (Based on the trailing twelve months to March 2022).

So, Wilhelmina International has an ROCE of 12%. In absolute terms, that's a satisfactory return, but compared to the Commercial Services industry average of 8.2% it's much better.

Check out our latest analysis for Wilhelmina International

roce
NasdaqCM:WHLM Return on Capital Employed May 17th 2022

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 Wilhelmina International has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

The Trend Of ROCE

Wilhelmina International has not disappointed with their ROCE growth. The figures show that over the last five years, ROCE has grown 236% whilst employing roughly the same amount of capital. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. 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 Wilhelmina International has been able to increase efficiencies and earn higher rates of return on the same amount of capital. Astute investors may have an opportunity here because the stock has declined 33% in the last five years. So researching this company further and determining whether or not these trends will continue seems justified.

One more thing, we've spotted 1 warning sign facing Wilhelmina International that you might find interesting.

While Wilhelmina International may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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