Neto Malinda Trading (TLV:NTML) Hasn't Managed To Accelerate Its Returns

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. That's why when we briefly looked at Neto Malinda Trading's (TLV:NTML) ROCE trend, we were pretty happy with what we saw.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

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. Analysts use this formula to calculate it for Neto Malinda Trading:

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

0.17 = ₪254m ÷ (₪2.1b - ₪551m) (Based on the trailing twelve months to December 2024).

Thus, Neto Malinda Trading has an ROCE of 17%. In isolation, that's a pretty standard return but against the Food industry average of 21%, it's not as good.

See our latest analysis for Neto Malinda Trading

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

The Trend Of ROCE

The trend of ROCE doesn't stand out much, but returns on a whole are decent. Over the past five years, ROCE has remained relatively flat at around 17% and the business has deployed 77% more capital into its operations. 17% is a pretty standard return, and it provides some comfort knowing that Neto Malinda Trading 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.

What We Can Learn From Neto Malinda Trading's ROCE

In the end, Neto Malinda Trading has proven its ability to adequately reinvest capital at good rates of return. On top of that, the stock has rewarded shareholders with a remarkable 133% return to those who've held over the last five years. So while the positive underlying trends may be accounted for by investors, we still think this stock is worth looking into further.

Neto Malinda Trading could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation for NTML on our platform quite valuable.

While Neto Malinda Trading isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.