Shareholders Would Enjoy A Repeat Of Maytronics' (TLV:MTRN) Recent Growth In Returns

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. 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. And in light of that, the trends we're seeing at Maytronics' (TLV:MTRN) look very promising so lets take 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. The formula for this calculation on Maytronics is:

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

0.35 = ₪285m ÷ (₪1.3b - ₪529m) (Based on the trailing twelve months to June 2021).

So, Maytronics has an ROCE of 35%. In absolute terms that's a great return and it's even better than the Consumer Durables industry average of 7.4%.

Check out our latest analysis for Maytronics

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

How Are Returns Trending?

The trends we've noticed at Maytronics are quite reassuring. Over the last five years, returns on capital employed have risen substantially to 35%. The amount of capital employed has increased too, by 144%. So we're very much inspired by what we're seeing at Maytronics thanks to its ability to profitably reinvest capital.

The Bottom Line

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Maytronics has. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

While Maytronics looks impressive, no company is worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether MTRN is currently trading for a fair price.

Maytronics is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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.

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