Yahoo Finance Returns Are Gaining Momentum At Walmart (NYSE:WMT)
If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, Walmart (NYSE:WMT) looks quite promising in regards to its trends of return on capital.
What Is Return On Capital Employed (ROCE)?
For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for Walmart:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.18 = US$28b ÷ (US$254b - US$95b) (Based on the trailing twelve months to July 2024).
Therefore, Walmart has an ROCE of 18%. In absolute terms, that's a satisfactory return, but compared to the Consumer Retailing industry average of 9.2% it's much better.
See our latest analysis for Walmart
Above you can see how the current ROCE for Walmart compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Walmart .
What The Trend Of ROCE Can Tell Us
Walmart's ROCE growth is quite impressive. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 27% in that same time. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.
The Key Takeaway
To sum it up, Walmart is collecting higher returns from the same amount of capital, and that's impressive. And a remarkable 115% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if Walmart can keep these trends up, it could have a bright future ahead.
If you'd like to know about the risks facing Walmart, we've discovered 1 warning sign that you should be aware of.
While Walmart 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.
