Returns On Capital Are Showing Encouraging Signs At Hamashbir 365 (TLV:MSBI)

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So on that note, Hamashbir 365 (TLV:MSBI) looks quite promising in regards to its trends of return on capital.

What is 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. The formula for this calculation on Hamashbir 365 is:

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

0.085 = ₪90m ÷ (₪1.5b - ₪408m) (Based on the trailing twelve months to December 2021).

So, Hamashbir 365 has an ROCE of 8.5%. In absolute terms, that's a low return, but it's much better than the Multiline Retail industry average of 5.5%.

See our latest analysis for Hamashbir 365

Historical performance is a great place to start when researching a stock so above you can see the gauge for Hamashbir 365's ROCE against it's prior returns. If you're interested in investigating Hamashbir 365's past further, check out this free graph of past earnings, revenue and cash flow.

What Does the ROCE Trend For Hamashbir 365 Tell Us?

While in absolute terms it isn't a high ROCE, it's promising to see that it has been moving in the right direction. The data shows that returns on capital have increased substantially over the last five years to 8.5%. 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 211%. So we're very much inspired by what we're seeing at Hamashbir 365 thanks to its ability to profitably reinvest capital.

One more thing to note, Hamashbir 365 has decreased current liabilities to 28% of total assets over this period, which effectively reduces the amount of funding from suppliers or short-term creditors. So this improvement in ROCE has come from the business' underlying economics, which is great to see.

The Bottom Line On Hamashbir 365's ROCE

In summary, it's great to see that Hamashbir 365 can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And since the stock has fallen 56% over the last five years, there might be an opportunity here. So researching this company further and determining whether or not these trends will continue seems justified.

If you want to continue researching Hamashbir 365, you might be interested to know about the 1 warning sign that our analysis has discovered.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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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.