Returns Are Gaining Momentum At Neto Malinda Trading (TLV:NTML)

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, 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. So on that note, Neto Malinda Trading (TLV:NTML) looks quite promising in regards to its trends of return on capital.

Understanding Return On Capital Employed (ROCE)

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. To calculate this metric for Neto Malinda Trading, this is the formula:

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

0.19 = ₪191m ÷ (₪1.4b - ₪362m) (Based on the trailing twelve months to December 2020).

So, Neto Malinda Trading has an ROCE of 19%. On its own, that's a standard return, however it's much better than the 11% generated by the Food industry.

See our latest analysis for Neto Malinda Trading

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'd like to look at how Neto Malinda Trading has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

So How Is Neto Malinda Trading's ROCE Trending?

Neto Malinda Trading is displaying some positive trends. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 19%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 42%. So we're very much inspired by what we're seeing at Neto Malinda Trading thanks to its ability to profitably reinvest capital.

What We Can Learn From Neto Malinda Trading's ROCE

All in all, it's terrific to see that Neto Malinda Trading is reaping the rewards from prior investments and is growing its capital base. And a remarkable 169% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if Neto Malinda Trading can keep these trends up, it could have a bright future ahead.

While Neto Malinda Trading looks impressive, no company is worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether NTML is currently trading for a fair price.

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.

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