Electra Power (2019)'s (TLV:ELCP) Returns On Capital Not Reflecting Well On The Business

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base 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. However, after investigating Electra Power (2019) (TLV:ELCP), we don't think it's current trends fit the mold of a multi-bagger.

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Understanding 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. The formula for this calculation on Electra Power (2019) is:

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

0.0046 = ₪6.6m ÷ (₪1.9b - ₪519m) (Based on the trailing twelve months to March 2025).

Therefore, Electra Power (2019) has an ROCE of 0.5%. In absolute terms, that's a low return and it also under-performs the Oil and Gas industry average of 8.5%.

Check out our latest analysis for Electra Power (2019)

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 Electra Power (2019)'s past further, check out this free graph covering Electra Power (2019)'s past earnings, revenue and cash flow.

The Trend Of ROCE

When we looked at the ROCE trend at Electra Power (2019), we didn't gain much confidence. To be more specific, ROCE has fallen from 11% over the last five years. 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.

Our Take On Electra Power (2019)'s ROCE

In summary, despite lower returns in the short term, we're encouraged to see that Electra Power (2019) is reinvesting for growth and has higher sales as a result. And there could be an opportunity here if other metrics look good too, because the stock has declined 59% in the last five years. As a result, we'd recommend researching this stock further to uncover what other fundamentals of the business can show us.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 4 warning signs for Electra Power (2019) (of which 3 are a bit unpleasant!) that you should know about.

While Electra Power (2019) 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.