Returns On Capital At Fattal Holdings (1998) (TLV:FTAL) Paint A Concerning Picture

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. Having said that, from a first glance at Fattal Holdings (1998) (TLV:FTAL) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

Return On Capital Employed (ROCE): What Is It?

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 Fattal Holdings (1998), this is the formula:

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

0.022 = ₪426m ÷ (₪22b - ₪2.4b) (Based on the trailing twelve months to June 2022).

So, Fattal Holdings (1998) has an ROCE of 2.2%. In absolute terms, that's a low return and it also under-performs the Hospitality industry average of 6.3%.

See our latest analysis for Fattal Holdings (1998)

Historical performance is a great place to start when researching a stock so above you can see the gauge for Fattal Holdings (1998)'s ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Fattal Holdings (1998), check out these free graphs here.

So How Is Fattal Holdings (1998)'s ROCE Trending?

When we looked at the ROCE trend at Fattal Holdings (1998), we didn't gain much confidence. Around five years ago the returns on capital were 6.2%, but since then they've fallen to 2.2%. However, given capital employed and revenue have both increased it appears that the business is currently pursuing growth, at the consequence of short term returns. And if the increased capital generates additional returns, the business, and thus shareholders, will benefit in the long run.

The Bottom Line

While returns have fallen for Fattal Holdings (1998) in recent times, we're encouraged to see that sales are growing and that the business is reinvesting in its operations. However, despite the promising trends, the stock has fallen 30% over the last three years, so there might be an opportunity here for astute investors. As a result, we'd recommend researching this stock further to uncover what other fundamentals of the business can show us.

On a separate note, we've found 1 warning sign for Fattal Holdings (1998) you'll probably want to know about.

While Fattal Holdings (1998) 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.