Investors Shouldn't Overlook Themis G.R.E.N's (TLV:TMIS) Impressive Returns On Capital

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. 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 Themis G.R.E.N (TLV:TMIS) looks great, so lets see what the trend can tell us.

Understanding 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. To calculate this metric for Themis G.R.E.N, this is the formula:

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

0.49 = ₪39m ÷ (₪93m - ₪14m) (Based on the trailing twelve months to June 2024).

Thus, Themis G.R.E.N has an ROCE of 49%. In absolute terms that's a great return and it's even better than the Consumer Durables industry average of 17%.

View our latest analysis for Themis G.R.E.N

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 Themis G.R.E.N has performed in the past in other metrics, you can view this free graph of Themis G.R.E.N's past earnings, revenue and cash flow.

What The Trend Of ROCE Can Tell Us

Like most people, we're pleased that Themis G.R.E.N is now generating some pretax earnings. While the business is profitable now, it used to be incurring losses on invested capital five years ago. In regards to capital employed, Themis G.R.E.N is using 56% less capital than it was five years ago, which on the surface, can indicate that the business has become more efficient at generating these returns. Themis G.R.E.N could be selling under-performing assets since the ROCE is improving.

The Bottom Line

From what we've seen above, Themis G.R.E.N has managed to increase it's returns on capital all the while reducing it's capital base. And a remarkable 202% 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 Themis G.R.E.N can keep these trends up, it could have a bright future ahead.

On a final note, we found 3 warning signs for Themis G.R.E.N (1 doesn't sit too well with us) you should be aware of.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high returns on equity.

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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.