Meshulam Levinstein Contracting & Engineering (TLV:LEVI) Shareholders Will Want The ROCE Trajectory To Continue

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. 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. So on that note, Meshulam Levinstein Contracting & Engineering (TLV:LEVI) looks quite promising in regards to its trends of return on capital.

Understanding 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 Meshulam Levinstein Contracting & Engineering is:

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

0.065 = ₪154m ÷ (₪3.1b - ₪708m) (Based on the trailing twelve months to December 2021).

Therefore, Meshulam Levinstein Contracting & Engineering has an ROCE of 6.5%. On its own, that's a low figure but it's around the 7.4% average generated by the Construction industry.

View 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're interested in investigating Meshulam Levinstein Contracting & Engineering's past further, check out this free graph of past earnings, revenue and cash flow.

How Are Returns Trending?

While in absolute terms it isn't a high ROCE, it's promising to see that it has been moving in the right direction. Over the last five years, returns on capital employed have risen substantially 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 37%. So we're very much inspired by what we're seeing at Meshulam Levinstein Contracting & Engineering thanks to its ability to profitably reinvest capital.

In Conclusion...

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Meshulam Levinstein Contracting & Engineering has. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. Therefore, we think it would be worth your time to check if these trends are going to continue.

Meshulam Levinstein Contracting & Engineering does have some risks, we noticed 2 warning signs (and 1 which is potentially serious) 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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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.