The Return Trends At Neto Malinda Trading (TLV:NTML) Look Promising

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Speaking of which, we noticed some great changes in Neto Malinda Trading's (TLV:NTML) returns on capital, so let's have a look.

What is 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. 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)

0.20 = ₪225m ÷ (₪1.6b - ₪432m) (Based on the trailing twelve months to September 2021).

Thus, Neto Malinda Trading has an ROCE of 20%. In absolute terms, that's a satisfactory return, but compared to the Food industry average of 11% it's much better.

View 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're interested in investigating Neto Malinda Trading's past further, check out this free graph of past earnings, revenue and cash flow.

So How Is Neto Malinda Trading's ROCE Trending?

We like the trends that we're seeing from Neto Malinda Trading. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 20%. 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 47%. So we're very much inspired by what we're seeing at Neto Malinda Trading thanks to its ability to profitably reinvest capital.

Our Take On 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 with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. Therefore, we think it would be worth your time to check if these trends are going to continue.

If you want to continue researching Neto Malinda Trading, you might be interested to know about the 1 warning sign that our analysis has discovered.

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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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.