The Returns At Ackerstein Group (TLV:ACKR) Aren't Growing

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. In light of that, when we looked at Ackerstein Group (TLV:ACKR) and its ROCE trend, we weren't exactly thrilled.

Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Ackerstein Group, this is the formula:

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

0.078 = ₪115m ÷ (₪1.9b - ₪424m) (Based on the trailing twelve months to June 2023).

Thus, Ackerstein Group has an ROCE of 7.8%. In absolute terms, that's a low return but it's around the Basic Materials industry average of 7.4%.

See our latest analysis for Ackerstein Group

Historical performance is a great place to start when researching a stock so above you can see the gauge for Ackerstein Group's ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Ackerstein Group, check out these free graphs here.

How Are Returns Trending?

In terms of Ackerstein Group's historical ROCE trend, it doesn't exactly demand attention. Over the past three years, ROCE has remained relatively flat at around 7.8% and the business has deployed 54% more capital into its operations. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

What We Can Learn From Ackerstein Group's ROCE

In summary, Ackerstein Group has simply been reinvesting capital and generating the same low rate of return as before. Unsurprisingly then, the total return to shareholders over the last year has been flat. All in all, the inherent trends aren't typical of multi-baggers, so if that's what you're after, we think you might have more luck elsewhere.

Like most companies, Ackerstein Group does come with some risks, and we've found 2 warning signs that you should be aware of.

While Ackerstein Group may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.