Investors Will Want European Wax Center's (NASDAQ:EWCZ) Growth In ROCE To Persist
If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Speaking of which, we noticed some great changes in European Wax Center's (NASDAQ:EWCZ) returns on capital, so let's have a look.
Return On Capital Employed (ROCE): What Is It?
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. To calculate this metric for European Wax Center, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.078 = US$54m ÷ (US$721m - US$30m) (Based on the trailing twelve months to October 2025).
Therefore, European Wax Center has an ROCE of 7.8%. Ultimately, that's a low return and it under-performs the Consumer Services industry average of 13%.
View our latest analysis for European Wax Center
Above you can see how the current ROCE for European Wax Center compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering European Wax Center for free.
What Does the ROCE Trend For European Wax Center Tell Us?
European Wax Center is showing promise given that its ROCE is trending up and to the right. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 4,494% over the last five years. 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. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.
In Conclusion...
In summary, we're delighted to see that European Wax Center has been able to increase efficiencies and earn higher rates of return on the same amount of capital. Although the company may be facing some issues elsewhere since the stock has plunged 72% in the last three years. Still, it's worth doing some further research to see if the trends will continue into the future.
If you want to continue researching European Wax Center, you might be interested to know about the 1 warning sign that our analysis has discovered.
While European Wax Center 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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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.