Danya Cebus (TLV:DNYA) Could Become A Multi-Bagger

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding 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. Speaking of which, we noticed some great changes in Danya Cebus' (TLV:DNYA) returns on capital, so let's have a look.

Return On Capital Employed (ROCE): What Is It?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Danya Cebus:

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

0.21 = ₪184m ÷ (₪2.8b - ₪1.9b) (Based on the trailing twelve months to September 2024).

So, Danya Cebus has an ROCE of 21%. While that is an outstanding return, the rest of the Consumer Durables industry generates similar returns, on average.

See our latest analysis for Danya Cebus

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

So How Is Danya Cebus' ROCE Trending?

Danya Cebus has not disappointed in regards to ROCE growth. The figures show that over the last five years, returns on capital have grown by 552%. The company is now earning ₪0.2 per dollar of capital employed. Interestingly, the business may be becoming more efficient because it's applying 66% less capital than it was five years ago. If this trend continues, the business might be getting more efficient but it's shrinking in terms of total assets.

For the record though, there was a noticeable increase in the company's current liabilities over the period, so we would attribute some of the ROCE growth to that. Effectively this means that suppliers or short-term creditors are now funding 68% of the business, which is more than it was five years ago. And with current liabilities at those levels, that's pretty high.

In Conclusion...

In the end, Danya Cebus has proven it's capital allocation skills are good with those higher returns from less amount of capital. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 46% return over the last three years. 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.

Danya Cebus does have some risks though, and we've spotted 2 warning signs for Danya Cebus that you might be interested in.

High returns are a key ingredient to strong performance, so check out our free list ofstocks 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.