Returns On Capital Are Showing Encouraging Signs At N.R. Spuntech Industries (TLV:SPNTC)

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount 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. So when we looked at N.R. Spuntech Industries (TLV:SPNTC) and its trend of ROCE, we really liked what we saw.

What Is Return On Capital Employed (ROCE)?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for N.R. Spuntech Industries:

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

0.16 = ₪66m ÷ (₪653m - ₪230m) (Based on the trailing twelve months to September 2024).

So, N.R. Spuntech Industries has an ROCE of 16%. In absolute terms, that's a satisfactory return, but compared to the Luxury industry average of 8.4% it's much better.

View our latest analysis for N.R. Spuntech Industries

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'd like to look at how N.R. Spuntech Industries has performed in the past in other metrics, you can view this free graph of N.R. Spuntech Industries' past earnings, revenue and cash flow.

So How Is N.R. Spuntech Industries' ROCE Trending?

N.R. Spuntech Industries' ROCE growth is quite impressive. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 27% in that same time. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

In Conclusion...

In summary, we're delighted to see that N.R. Spuntech Industries has been able to increase efficiencies and earn higher rates of return on the same amount of capital. Considering the stock has delivered 4.0% to its stockholders over the last five years, it may be fair to think that investors aren't fully aware of the promising trends yet. Given that, we'd look further into this stock in case it has more traits that could make it multiply in the long term.

If you'd like to know more about N.R. Spuntech Industries, we've spotted 5 warning signs, and 1 of them is concerning.

While N.R. Spuntech Industries 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.