Returns On Capital Are A Standout For Ilex Medical (TLV:ILX)

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. 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. With that in mind, the ROCE of Ilex Medical (TLV:ILX) looks great, so lets see what the trend can tell us.

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. Analysts use this formula to calculate it for Ilex Medical:

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

0.29 = ₪147m ÷ (₪779m - ₪279m) (Based on the trailing twelve months to December 2020).

So, Ilex Medical has an ROCE of 29%. That's a fantastic return and not only that, it outpaces the average of 9.9% earned by companies in a similar industry.

See our latest analysis for Ilex Medical

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

What The Trend Of ROCE Can Tell Us

The trends we've noticed at Ilex Medical are quite reassuring. Over the last five years, returns on capital employed have risen substantially to 29%. The amount of capital employed has increased too, by 58%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

In Conclusion...

To sum it up, Ilex Medical has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And a remarkable 284% total return over the last five years tells us that investors are expecting more good things to come in the future. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

One more thing, we've spotted 2 warning signs facing Ilex Medical that you might find interesting.

Ilex Medical is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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