Return Trends At Azorim-Investment Development & Construction (TLV:AZRM) Aren't Appealing

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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Although, when we looked at Azorim-Investment Development & Construction (TLV:AZRM), it didn't seem to tick all of these boxes.

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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. The formula for this calculation on Azorim-Investment Development & Construction is:

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

0.09 = ₪350m ÷ (₪7.6b - ₪3.7b) (Based on the trailing twelve months to March 2025).

Therefore, Azorim-Investment Development & Construction has an ROCE of 9.0%. Even though it's in line with the industry average of 9.0%, it's still a low return by itself.

See our latest analysis for Azorim-Investment Development & Construction

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Azorim-Investment Development & Construction.

How Are Returns Trending?

There are better returns on capital out there than what we're seeing at Azorim-Investment Development & Construction. The company has employed 77% more capital in the last five years, and the returns on that capital have remained stable at 9.0%. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.

On a side note, Azorim-Investment Development & Construction's current liabilities are still rather high at 49% of total assets. This effectively means that suppliers (or short-term creditors) are funding a large portion of the business, so just be aware that this can introduce some elements of risk. Ideally we'd like to see this reduce as that would mean fewer obligations bearing risks.

Our Take On Azorim-Investment Development & Construction's ROCE

In summary, Azorim-Investment Development & Construction has simply been reinvesting capital and generating the same low rate of return as before. Investors must think there's better things to come because the stock has knocked it out of the park, delivering a 312% gain to shareholders who have held over the last five years. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.

On a final note, we found 2 warning signs for Azorim-Investment Development & Construction (1 can't be ignored) you should be aware of.

While Azorim-Investment Development & Construction 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.