Mendelson Infrastructures & Industries (TLV:MNIN) Is Doing The Right Things To Multiply Its Share Price

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. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount 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. So when we looked at Mendelson Infrastructures & Industries (TLV:MNIN) and its trend of ROCE, we really liked what we saw.

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What Is Return On Capital Employed (ROCE)?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. To calculate this metric for Mendelson Infrastructures & Industries, this is the formula:

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

0.12 = ₪74m ÷ (₪1.0b - ₪387m) (Based on the trailing twelve months to September 2024).

Thus, Mendelson Infrastructures & Industries has an ROCE of 12%. In absolute terms, that's a satisfactory return, but compared to the Trade Distributors industry average of 7.2% it's much better.

See our latest analysis for Mendelson Infrastructures & Industries

Historical performance is a great place to start when researching a stock so above you can see the gauge for Mendelson Infrastructures & Industries' ROCE against it's prior returns. If you're interested in investigating Mendelson Infrastructures & Industries' past further, check out this free graph covering Mendelson Infrastructures & Industries' past earnings, revenue and cash flow.

What Does the ROCE Trend For Mendelson Infrastructures & Industries Tell Us?

Investors would be pleased with what's happening at Mendelson Infrastructures & Industries. Over the last five years, returns on capital employed have risen substantially to 12%. 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 36%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

The Bottom Line On Mendelson Infrastructures & Industries' ROCE

To sum it up, Mendelson Infrastructures & Industries has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. 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 spotted 1 warning sign facing Mendelson Infrastructures & Industries that you might find interesting.

While Mendelson Infrastructures & Industries may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.