Is There More Growth In Store For G. Willi-Food International's (NASDAQ:WILC) Returns On Capital?

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So when we looked at G. Willi-Food International (NASDAQ:WILC) and its trend of ROCE, we really liked what we saw.

Understanding Return On Capital Employed (ROCE)

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. The formula for this calculation on G. Willi-Food International is:

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

0.11 = ₪62m ÷ (₪616m - ₪40m) (Based on the trailing twelve months to September 2020).

Therefore, G. Willi-Food International has an ROCE of 11%. By itself that's a normal return on capital and it's in line with the industry's average returns of 11%.

Check out our latest analysis for G. Willi-Food International

Historical performance is a great place to start when researching a stock so above you can see the gauge for G. Willi-Food International's ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of G. Willi-Food International, check out these free graphs here.

What Does the ROCE Trend For G. Willi-Food International Tell Us?

We like the trends that we're seeing from G. Willi-Food International. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 11%. The amount of capital employed has increased too, by 44%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

The Bottom Line On G. Willi-Food International's ROCE

In summary, it's great to see that G. Willi-Food International 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. 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.

One more thing, we've spotted 3 warning signs facing G. Willi-Food International that you might find interesting.

While G. Willi-Food International 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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