M.Yochananof and Sons (1988) (TLV:YHNF) Hasn't Managed To Accelerate Its Returns

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. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So, when we ran our eye over M.Yochananof and Sons (1988)'s (TLV:YHNF) trend of ROCE, we liked what we saw.

Understanding Return On Capital Employed (ROCE)

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. To calculate this metric for M.Yochananof and Sons (1988), this is the formula:

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

0.10 = ₪328m ÷ (₪4.1b - ₪921m) (Based on the trailing twelve months to June 2024).

Thus, M.Yochananof and Sons (1988) has an ROCE of 10%. That's a pretty standard return and it's in line with the industry average of 10%.

View our latest analysis for M.Yochananof and Sons (1988)

Historical performance is a great place to start when researching a stock so above you can see the gauge for M.Yochananof and Sons (1988)'s ROCE against it's prior returns. If you'd like to look at how M.Yochananof and Sons (1988) has performed in the past in other metrics, you can view this free graph of M.Yochananof and Sons (1988)'s past earnings, revenue and cash flow.

What Can We Tell From M.Yochananof and Sons (1988)'s ROCE Trend?

While the returns on capital are good, they haven't moved much. Over the past five years, ROCE has remained relatively flat at around 10% and the business has deployed 143% more capital into its operations. 10% is a pretty standard return, and it provides some comfort knowing that M.Yochananof and Sons (1988) has consistently earned this amount. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

One more thing to note, even though ROCE has remained relatively flat over the last five years, the reduction in current liabilities to 22% of total assets, is good to see from a business owner's perspective. This can eliminate some of the risks inherent in the operations because the business has less outstanding obligations to their suppliers and or short-term creditors than they did previously.

What We Can Learn From M.Yochananof and Sons (1988)'s ROCE

To sum it up, M.Yochananof and Sons (1988) has simply been reinvesting capital steadily, at those decent rates of return. And given the stock has only risen 9.8% over the last three years, we'd suspect the market is beginning to recognize these trends. So to determine if M.Yochananof and Sons (1988) is a multi-bagger going forward, we'd suggest digging deeper into the company's other fundamentals.

If you're still interested in M.Yochananof and Sons (1988) it's worth checking out our FREE intrinsic value approximation for YHNF to see if it's trading at an attractive price in other respects.

While M.Yochananof and Sons (1988) may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.