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. With that in mind, the ROCE of Dillard's (NYSE:DDS) looks great, so lets see what the trend can tell us.

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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 Dillard's is:

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

0.27 = US$740m ÷ (US$3.5b - US$835m) (Based on the trailing twelve months to February 2025).

Thus, Dillard's has an ROCE of 27%. In absolute terms that's a great return and it's even better than the Multiline Retail industry average of 14%.

Check out our latest analysis for Dillard's

Above you can see how the current ROCE for Dillard's 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 Dillard's .

What Does the ROCE Trend For Dillard's Tell Us?

Dillard's' ROCE growth is quite impressive. The figures show that over the last five years, ROCE has grown 329% whilst employing roughly the same amount of capital. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

Our Take On Dillard's' ROCE

In summary, we're delighted to see that Dillard's has been able to increase efficiencies and earn higher rates of return on the same amount of capital. Since the stock has returned a staggering 867% to shareholders over the last five years, it looks like investors are recognizing these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

One final note, you should learn about the 2 warning signs we've spotted with Dillard's (including 1 which can't be ignored) .

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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.