Returns At Meshulam Levinstein Contracting & Engineering (TLV:LEVI) Are On The Way Up

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. With that in mind, we've noticed some promising trends at Meshulam Levinstein Contracting & Engineering (TLV:LEVI) so let's look a bit deeper.

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. 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)

0.05 = ₪150m ÷ (₪3.7b - ₪717m) (Based on the trailing twelve months to September 2023).

Therefore, Meshulam Levinstein Contracting & Engineering has an ROCE of 5.0%. Ultimately, that's a low return and it under-performs the Construction industry average of 6.4%.

Check out 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.

So How Is Meshulam Levinstein Contracting & Engineering's ROCE 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. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 5.0%. 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 59%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

Our Take 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 213% 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.

One more thing: We've identified 2 warning signs with Meshulam Levinstein Contracting & Engineering (at least 1 which shouldn't be ignored) , and understanding them would certainly be useful.

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.