Electra Consumer Products (1970) (TLV:ECP) Shareholders Will Want The ROCE Trajectory To Continue

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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Speaking of which, we noticed some great changes in Electra Consumer Products (1970)'s (TLV:ECP) returns on capital, so let's have a look.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

Understanding Return On Capital Employed (ROCE)

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. Analysts use this formula to calculate it for Electra Consumer Products (1970):

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

0.08 = ₪357m ÷ (₪8.0b - ₪3.5b) (Based on the trailing twelve months to March 2025).

So, Electra Consumer Products (1970) has an ROCE of 8.0%. In absolute terms, that's a low return but it's around the Consumer Durables industry average of 9.0%.

See our latest analysis for Electra Consumer Products (1970)

Historical performance is a great place to start when researching a stock so above you can see the gauge for Electra Consumer Products (1970)'s ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Electra Consumer Products (1970).

What Can We Tell From Electra Consumer Products (1970)'s ROCE Trend?

Electra Consumer Products (1970) has recently broken into profitability so their prior investments seem to be paying off. About five years ago the company was generating losses but things have turned around because it's now earning 8.0% on its capital. In addition to that, Electra Consumer Products (1970) is employing 184% more capital than previously which is expected of a company that's trying to break into profitability. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

On a side note, Electra Consumer Products (1970)'s current liabilities are still rather high at 44% of total assets. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. Ideally we'd like to see this reduce as that would mean fewer obligations bearing risks.

The Bottom Line

Long story short, we're delighted to see that Electra Consumer Products (1970)'s reinvestment activities have paid off and the company is now profitable. Since the stock has returned a solid 63% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. 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.

Electra Consumer Products (1970) does have some risks, we noticed 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

While Electra Consumer Products (1970) isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.