We Like Albaad Massuot Yitzhak's (TLV:ALBA) Returns And Here's How They're Trending

There are a few key trends to look for if we want to identify the next multi-bagger. 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Speaking of which, we noticed some great changes in Albaad Massuot Yitzhak's (TLV:ALBA) returns on capital, so let's have a look.

Understanding Return On Capital Employed (ROCE)

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for Albaad Massuot Yitzhak:

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

0.21 = ₪205m ÷ (₪1.5b - ₪487m) (Based on the trailing twelve months to March 2021).

So, Albaad Massuot Yitzhak has an ROCE of 21%. In absolute terms that's a very respectable return and compared to the Household Products industry average of 18% it's pretty much on par.

Check out our latest analysis for Albaad Massuot Yitzhak

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

What The Trend Of ROCE Can Tell Us

Albaad Massuot Yitzhak has not disappointed with their ROCE growth. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 135% over the last five years. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

The Key Takeaway

To sum it up, Albaad Massuot Yitzhak is collecting higher returns from the same amount of capital, and that's impressive. Since the stock has returned a solid 95% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

On a final note, we found 4 warning signs for Albaad Massuot Yitzhak (1 is a bit unpleasant) you should be aware of.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high 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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