Is There More Growth In Store For Meshulam Levinstein Contracting & Engineering's (TLV:LEVI) Returns On Capital?

There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So on that note, Meshulam Levinstein Contracting & Engineering (TLV:LEVI) looks quite promising in regards to its trends of return on capital.

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. Analysts use this formula to calculate it for Meshulam Levinstein Contracting & Engineering:

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

0.065 = ₪116m ÷ (₪2.5b - ₪715m) (Based on the trailing twelve months to September 2020).

So, Meshulam Levinstein Contracting & Engineering has an ROCE of 6.5%. In absolute terms, that's a low return and it also under-performs the Construction industry average of 10%.

See our latest analysis for Meshulam Levinstein Contracting & Engineering

Historical performance is a great place to start when researching a stock so above you can see the gauge for Meshulam Levinstein Contracting & Engineering's ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Meshulam Levinstein Contracting & Engineering, check out these free graphs here.

So How Is Meshulam Levinstein Contracting & Engineering's ROCE Trending?

Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 6.5%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 46%. So we're very much inspired by what we're seeing at Meshulam Levinstein Contracting & Engineering thanks to its ability to profitably reinvest capital.

The Bottom Line

To sum it up, Meshulam Levinstein Contracting & Engineering has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Since the stock has returned a staggering 240% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if Meshulam Levinstein Contracting & Engineering can keep these trends up, it could have a bright future ahead.

Meshulam Levinstein Contracting & Engineering does have some risks, we noticed 3 warning signs (and 1 which is concerning) we think you should know about.

While Meshulam Levinstein Contracting & Engineering isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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