Carmit Candy Industries' (TLV:CRMT) Returns On Capital Not Reflecting Well On The Business

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. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. However, after briefly looking over the numbers, we don't think Carmit Candy Industries (TLV:CRMT) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

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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. The formula for this calculation on Carmit Candy Industries is:

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

0.058 = ₪7.6m ÷ (₪275m - ₪143m) (Based on the trailing twelve months to June 2025).

So, Carmit Candy Industries has an ROCE of 5.8%. In absolute terms, that's a low return and it also under-performs the Food industry average of 20%.

See our latest analysis for Carmit Candy Industries

Historical performance is a great place to start when researching a stock so above you can see the gauge for Carmit Candy Industries' ROCE against it's prior returns. If you're interested in investigating Carmit Candy Industries' past further, check out this free graph covering Carmit Candy Industries' past earnings, revenue and cash flow.

So How Is Carmit Candy Industries' ROCE Trending?

On the surface, the trend of ROCE at Carmit Candy Industries doesn't inspire confidence. To be more specific, ROCE has fallen from 10% 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.

On a separate but related note, it's important to know that Carmit Candy Industries has a current liabilities to total assets ratio of 52%, which we'd consider pretty high. This effectively means that suppliers (or short-term creditors) are funding a large portion of the business, so just be aware that this can introduce some elements of risk. Ideally we'd like to see this reduce as that would mean fewer obligations bearing risks.

Our Take On Carmit Candy Industries' ROCE

While returns have fallen for Carmit Candy Industries in recent times, we're encouraged to see that sales are growing and that the business is reinvesting in its operations. These growth trends haven't led to growth returns though, since the stock has fallen 22% over the last five years. So we think it'd be worthwhile to look further into this stock given the trends look encouraging.

One final note, you should learn about the 4 warning signs we've spotted with Carmit Candy Industries (including 3 which are a bit concerning) .

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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.