Investors Should Be Encouraged By Netanel Group's (TLV:NTGR) Returns On Capital

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. With that in mind, the ROCE of Netanel Group (TLV:NTGR) looks great, so lets see what the trend can tell us.

What Is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Netanel Group, this is the formula:

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

0.27 = ₪177m ÷ (₪1.5b - ₪840m) (Based on the trailing twelve months to March 2024).

Therefore, Netanel Group has an ROCE of 27%. In absolute terms that's a great return and it's even better than the Consumer Durables industry average of 21%.

Check out our latest analysis for Netanel Group

Historical performance is a great place to start when researching a stock so above you can see the gauge for Netanel Group'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 Netanel Group.

What The Trend Of ROCE Can Tell Us

The trends we've noticed at Netanel Group are quite reassuring. The data shows that returns on capital have increased substantially over the last five years to 27%. 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 59%. So we're very much inspired by what we're seeing at Netanel Group thanks to its ability to profitably reinvest capital.

On a separate but related note, it's important to know that Netanel Group has a current liabilities to total assets ratio of 56%, which we'd consider pretty high. 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

To sum it up, Netanel Group has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And a remarkable 227% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if Netanel Group can keep these trends up, it could have a bright future ahead.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 4 warning signs for Netanel Group (of which 2 shouldn't be ignored!) that you should know about.

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.

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