Meshulam Levinstein Contracting & Engineering's (TLV:LEVI) Returns On Capital Are Heading Higher

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So when we looked at Meshulam Levinstein Contracting & Engineering (TLV:LEVI) and its trend of ROCE, we really liked what we saw.

Understanding 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. 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)

0.064 = ₪117m ÷ (₪2.4b - ₪631m) (Based on the trailing twelve months to March 2021).

Thus, Meshulam Levinstein Contracting & Engineering has an ROCE of 6.4%. In absolute terms, that's a low return and it also under-performs the Construction industry average of 9.3%.

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'd like to look at how Meshulam Levinstein Contracting & Engineering has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

The Trend Of ROCE

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 6.4%. The amount of capital employed has increased too, by 28%. 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 On Meshulam Levinstein Contracting & Engineering's ROCE

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. And a remarkable 161% total return over the last five years tells us that investors are expecting more good things to come in the future. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

If you want to know some of the risks facing Meshulam Levinstein Contracting & Engineering we've found 4 warning signs (1 can't be ignored!) that you should be aware of before investing here.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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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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