We're Watching These Trends At Neto Malinda Trading (TLV:NTML)

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. With that in mind, the ROCE of Neto Malinda Trading (TLV:NTML) looks decent, right now, so lets see what the trend of returns can tell us.

Understanding Return On Capital Employed (ROCE)

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its 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)

0.18 = ₪172m ÷ (₪1.4b - ₪396m) (Based on the trailing twelve months to September 2020).

Thus, Neto Malinda Trading has an ROCE of 18%. In absolute terms, that's a satisfactory return, but compared to the Food industry average of 12% 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.

What Can We Tell From Neto Malinda Trading's ROCE Trend?

While the returns on capital are good, they haven't moved much. The company has consistently earned 18% for the last five years, and the capital employed within the business has risen 41% in that time. Since 18% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. 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.

Our Take On Neto Malinda Trading's ROCE

To sum it up, Neto Malinda Trading has simply been reinvesting capital steadily, at those decent rates of return. On top of that, the stock has rewarded shareholders with a remarkable 155% 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.

If you're still interested in Neto Malinda Trading it's worth checking out our FREE intrinsic value approximation to see if it's trading at an attractive price in other respects.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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This article by Simply Wall St is general in nature. 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.
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