Why The 49% Return On Capital At Themis G.R.E.N (TLV:TMIS) Should Have Your Attention

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'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 Themis G.R.E.N (TLV:TMIS) looks great, so lets see what the trend can tell us.

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What Is Return On Capital Employed (ROCE)?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for Themis G.R.E.N:

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).

So, Themis G.R.E.N has an ROCE of 49%. That's a fantastic return and not only that, it outpaces the average of 14% earned by companies in a similar industry.

Check out 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're interested in investigating Themis G.R.E.N's past further, check out this free graph covering Themis G.R.E.N's past earnings, revenue and cash flow.

What The Trend Of ROCE Can Tell Us

We're delighted to see that Themis G.R.E.N is reaping rewards from its investments and has now broken into profitability. 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. This could potentially mean that the company is selling some of its assets.

What We Can Learn From Themis G.R.E.N's ROCE

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 242% total return over the last five years tells us that investors are expecting more good things to come in the future. Therefore, we think it would be worth your time to check if these trends are going to continue.

One final note, you should learn about the 4 warning signs we've spotted with Themis G.R.E.N (including 1 which shouldn't be ignored) .

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.