Returns On Capital Are Showing Encouraging Signs At G. Willi-Food International (NASDAQ:WILC)

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing 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. Speaking of which, we noticed some great changes in G. Willi-Food International's (NASDAQ:WILC) returns on capital, so let's have a look.

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. 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)

0.088 = ₪54m ÷ (₪657m - ₪45m) (Based on the trailing twelve months to March 2021).

So, G. Willi-Food International has an ROCE of 8.8%. In absolute terms, that's a low return but it's around the Consumer Retailing industry average of 9.5%.

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'd like to look at how G. Willi-Food International has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

How Are Returns Trending?

Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 8.8%. Basically the business is earning more per dollar of capital invested and in addition to that, 51% more capital is being employed now too. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

Our Take On G. Willi-Food International's ROCE

All in all, it's terrific to see that G. Willi-Food International is reaping the rewards from prior investments and is growing its capital base. And a remarkable 431% total return over the last five years tells us that investors are expecting more good things to come in the future. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

On a final note, we've found 1 warning sign for G. Willi-Food International that we think you should be aware of.

While G. Willi-Food 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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