When researching a stock for investment, what can tell us that the company is in decline? Businesses in decline often have two underlying trends, firstly, a declining return on capital employed (ROCE) and a declining base of capital employed. Basically the company is earning less on its investments and it is also reducing its total assets. So after we looked into Taylor Wimpey (LON:TW.), the trends above didn't look too great.

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What Is Return On Capital Employed (ROCE)?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for Taylor Wimpey, this is the formula:

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

0.08 = UK£394m ÷ (UK£6.3b - UK£1.3b) (Based on the trailing twelve months to June 2025).

Thus, Taylor Wimpey has an ROCE of 8.0%.  On its own, that's a low figure but it's around the 9.0% average generated by the Consumer Durables industry.

View our latest analysis for Taylor Wimpey LSE:TW. Return on Capital Employed August 4th 2025

Above you can see how the current ROCE for Taylor Wimpey 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 freeanalyst report for Taylor Wimpey .

What Can We Tell From Taylor Wimpey's ROCE Trend?

We are a bit worried about the trend of returns on capital at Taylor Wimpey. Unfortunately the returns on capital have diminished from the 12% that they were earning five years ago. On top of that, it's worth noting that the amount of capital employed within the business has remained relatively steady. Since returns are falling and the business has the same amount of assets employed, this can suggest it's a mature business that hasn't had much growth in the last five years. So because these trends aren't typically conducive to creating a multi-bagger, we wouldn't hold our breath on Taylor Wimpey becoming one if things continue as they have.

What We Can Learn From Taylor Wimpey's ROCE

In summary, it's unfortunate that Taylor Wimpey is generating lower returns from the same amount of capital. In spite of that, the stock has delivered a 19% return to shareholders who held over the last five years. Regardless, we don't like the trends as they are and if they persist, we think you might find better investments elsewhere.

Story Continues

One final note, you should learn about the  3 warning signs  we've spotted with Taylor Wimpey (including 1 which doesn't sit too well with us) .

While Taylor Wimpey isn't earning the highest return, check out this freelist 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.

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