What are the early trends we should look for to identify a stock that could multiply in value over the long term? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at Woolworths Holdings (JSE:WHL) and its trend of ROCE, we really liked what we saw.

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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. To calculate this metric for Woolworths Holdings, this is the formula:

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

0.18 = R5.1b ÷ (R41b - R12b) (Based on the trailing twelve months to June 2025).

So, Woolworths Holdings has an ROCE of 18%.  In absolute terms, that's a satisfactory return, but compared to the Multiline Retail industry average of 7.8% it's much better.

See our latest analysis for Woolworths Holdings JSE:WHL Return on Capital Employed September 26th 2025

In the above chart we have measured Woolworths Holdings' prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Woolworths Holdings .

The Trend Of ROCE

We're pretty happy with how the ROCE has been trending at Woolworths Holdings. The figures show that over the last five years, returns on capital have grown by 84%. That's not bad because this tells for every dollar invested (capital employed), the company is increasing the amount earned from that dollar. In regards to capital employed, Woolworths Holdings appears to been achieving more with less, since the business is using 42% less capital to run its operation. A business that's shrinking its asset base like this isn't usually typical of a soon to be multi-bagger company.

The Key Takeaway

In a nutshell, we're pleased to see that Woolworths Holdings has been able to generate higher returns from less capital. Since the stock has returned a solid 64% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

Story Continues

One more thing to note, we've identified  1 warning sign  with Woolworths Holdings and understanding it should be part of your investment process.

For those who like to invest in solid companies, check out this freelist of companies with solid balance sheets and high returns on equity.

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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.

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