Isramco Negev 2 Limited Partnership (TLV:ISRA) Will Be Hoping To Turn Its Returns On Capital Around

When it comes to investing, there are some useful financial metrics that can warn us when a business is potentially in trouble. Typically, we'll see the trend of both return on capital employed (ROCE) declining and this usually coincides with a decreasing amount of capital employed. This indicates to us that the business is not only shrinking the size of its net assets, but its returns are falling as well. And from a first read, things don't look too good at Isramco Negev 2 Limited Partnership (TLV:ISRA), so let's see why.

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

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 Isramco Negev 2 Limited Partnership, this is the formula:

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

0.16 = US$180m ÷ (US$1.3b - US$192m) (Based on the trailing twelve months to June 2025).

Thus, Isramco Negev 2 Limited Partnership has an ROCE of 16%. On its own, that's a standard return, however it's much better than the 11% generated by the Oil and Gas industry.

Check out our latest analysis for Isramco Negev 2 Limited Partnership

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 Isramco Negev 2 Limited Partnership's past further, check out this free graph covering Isramco Negev 2 Limited Partnership's past earnings, revenue and cash flow.

What Can We Tell From Isramco Negev 2 Limited Partnership's ROCE Trend?

We are a bit worried about the trend of returns on capital at Isramco Negev 2 Limited Partnership. About five years ago, returns on capital were 29%, however they're now substantially lower than that as we saw above. And on the capital employed front, the business is utilizing roughly the same amount of capital as it was back then. Since returns are falling and the business has the same amount of assets employed, this can suggest it's a mature business that hasn't had much growth in the last five years. So because these trends aren't typically conducive to creating a multi-bagger, we wouldn't hold our breath on Isramco Negev 2 Limited Partnership becoming one if things continue as they have.

The Bottom Line On Isramco Negev 2 Limited Partnership's ROCE

In summary, it's unfortunate that Isramco Negev 2 Limited Partnership is generating lower returns from the same amount of capital. Yet despite these poor fundamentals, the stock has gained a huge 611% over the last five years, so investors appear very optimistic. Regardless, we don't feel too comfortable with the fundamentals so we'd be steering clear of this stock for now.

Isramco Negev 2 Limited Partnership does come with some risks though, we found 3 warning signs in our investment analysis, and 1 of those is potentially serious...

While Isramco Negev 2 Limited Partnership isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.