Explore Levi Strauss's Fair Values from the Community and select yours

If you're looking for a multi-bagger, there's a few things to keep an eye out for. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount 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 Levi Strauss' (NYSE:LEVI) returns on capital, so let's have a look.

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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. The formula for this calculation on Levi Strauss is:

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

0.17 = US$762m ÷ (US$6.5b - US$2.0b) (Based on the trailing twelve months to June 2025).

Therefore, Levi Strauss has an ROCE of 17%. In absolute terms, that's a satisfactory return, but compared to the Luxury industry average of 12% it's much better.

Check out our latest analysis for Levi Strauss

Above you can see how the current ROCE for Levi Strauss compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Levi Strauss .

What Can We Tell From Levi Strauss' ROCE Trend?

Levi Strauss' ROCE growth is quite impressive. The figures show that over the last five years, ROCE has grown 160% whilst employing roughly the same amount of capital. 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. It's worth looking deeper into this though because while it's great that the business is more efficient, it might also mean that going forward the areas to invest internally for the organic growth are lacking.

Our Take On Levi Strauss' ROCE

In summary, we're delighted to see that Levi Strauss has been able to increase efficiencies and earn higher rates of return on the same amount of capital. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 86% return over the last five years. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

Levi Strauss does have some risks though, and we've spotted 2 warning signs for Levi Strauss that you might be interested in.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.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.