We're Watching These Trends At Bet Shemesh Engines Holdings (1997) (TLV:BSEN)

To find a multi-bagger stock, what are the underlying trends we should look for in a business? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Having said that, from a first glance at Bet Shemesh Engines Holdings (1997) (TLV:BSEN) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

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 Bet Shemesh Engines Holdings (1997), this is the formula:

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

0.069 = US$14m ÷ (US$260m - US$63m) (Based on the trailing twelve months to September 2020).

So, Bet Shemesh Engines Holdings (1997) has an ROCE of 6.9%. On its own that's a low return on capital but it's in line with the industry's average returns of 6.9%.

Check out our latest analysis for Bet Shemesh Engines Holdings (1997)

Historical performance is a great place to start when researching a stock so above you can see the gauge for Bet Shemesh Engines Holdings (1997)'s ROCE against it's prior returns. If you're interested in investigating Bet Shemesh Engines Holdings (1997)'s past further, check out this free graph of past earnings, revenue and cash flow.

The Trend Of ROCE

When we looked at the ROCE trend at Bet Shemesh Engines Holdings (1997), we didn't gain much confidence. Over the last five years, returns on capital have decreased to 6.9% from 15% five years ago. However it looks like Bet Shemesh Engines Holdings (1997) might be reinvesting for long term growth because while capital employed has increased, the company's sales haven't changed much in the last 12 months. It's worth keeping an eye on the company's earnings from here on to see if these investments do end up contributing to the bottom line.

What We Can Learn From Bet Shemesh Engines Holdings (1997)'s ROCE

In summary, Bet Shemesh Engines Holdings (1997) is reinvesting funds back into the business for growth but unfortunately it looks like sales haven't increased much just yet. Since the stock has gained an impressive 67% over the last five years, investors must think there's better things to come. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.

One more thing, we've spotted 3 warning signs facing Bet Shemesh Engines Holdings (1997) that you might find interesting.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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