Advertisement
If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing 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. Ergo, when we looked at the ROCE trends at Computer Direct Group (TLV:CMDR), we liked what we saw.
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. To calculate this metric for Computer Direct Group, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.24 = ₪254m ÷ (₪2.1b - ₪1.0b) (Based on the trailing twelve months to September 2023).
Therefore, Computer Direct Group has an ROCE of 24%. That's a fantastic return and not only that, it outpaces the average of 16% earned by companies in a similar industry.
View our latest analysis for Computer Direct Group
While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you're interested in investigating Computer Direct Group's past further, check out this free graph covering Computer Direct Group's past earnings, revenue and cash flow.
How Are Returns Trending?
In terms of Computer Direct Group's history of ROCE, it's quite impressive. The company has consistently earned 24% for the last five years, and the capital employed within the business has risen 160% in that time. Now considering ROCE is an attractive 24%, this combination is actually pretty appealing because it means the business can consistently put money to work and generate these high returns. You'll see this when looking at well operated businesses or favorable business models.
On a side note, Computer Direct Group's current liabilities are still rather high at 50% of total assets. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. Ideally we'd like to see this reduce as that would mean fewer obligations bearing risks.
In Conclusion...
Computer Direct Group has demonstrated its proficiency by generating high returns on increasing amounts of capital employed, which we're thrilled about. And long term investors would be thrilled with the 288% return they've received over the last five years. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.
Like most companies, Computer Direct Group does come with some risks, and we've found 1 warning sign that you should be aware of.
High returns are a key ingredient to strong performance, so check out our free list ofstocks earning high returns on equity with solid balance sheets.
New: AI Stock Screener & Alerts
Our new AI Stock Screener scans the market every day to uncover opportunities.
• Dividend Powerhouses (3%+ Yield)
• Undervalued Small Caps with Insider Buying
• High growth Tech and AI Companies
Or build your own from over 50 metrics.
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.
About TASE:CMDR
Computer Direct Group
Engages in the computing and software business in Israel.
Flawless balance sheet, good value and pays a dividend.
Market Insights
Advertisement
Weekly Picks
LO
Lou_Basenese on Optimi Health ·
The Only Psychedelic Company Already Selling MDMA and Psilocybin to Real Patients, Yet Priced Like It Doesn’t Exist
Fair Value:US$1157.5% undervalued
47 followersusers have followed this narrative
2 commentsusers have commented on this narrative
8 likesusers have liked this narrative
WE
WealthAP on Novo Nordisk ·
Novo Nordisk (NVO): Is the "Easy Growth" Story Over?
Fair Value:DKK 407.7721.4% undervalued
69 followersusers have followed this narrative
0 commentsusers have commented on this narrative
8 likesusers have liked this narrative
VA
ValueInvestingSubstack on Zoetis ·
Zoetis down -50% over the past year
Fair Value:US$92.9218.9% undervalued
23 followersusers have followed this narrative
0 commentsusers have commented on this narrative
9 likesusers have liked this narrative
CE
CentryResearch on Centrus Energy ·
Centrus Energy: The Next Nuclear Bottleneck Isn't Reactors. It's Fuel.
Fair Value:US$19013.7% undervalued
24 followersusers have followed this narrative
0 commentsusers have commented on this narrative
10 likesusers have liked this narrative
Recently Updated Narratives
WI
WisetoWealth on PayPal Holdings ·
The Underrated Transformation of a Digital Payments Giant
Fair Value:US$90.3137.8% undervalued
2 followersusers have followed this narrative
0 commentsusers have commented on this narrative
0 likesusers have liked this narrative
BL
Blagget on Terra Balcanica Resources ·
The C$4M Explorer Positioned to Become Europe's First Antimony Mine
Fair Value:CA$0.487.5% undervalued
2 followersusers have followed this narrative
0 commentsusers have commented on this narrative
0 likesusers have liked this narrative
DA
david_6nroa on Charter Communications ·
Charter is undervalued - Here's why.
Fair Value:US$87.0741.6% overvalued
1 followerusers have followed this narrative
0 commentsusers have commented on this narrative
0 likesusers have liked this narrative
Popular Narratives
CU
CubanEros on Microsoft ·
A wonderful business at reasonable price.
Fair Value:US$419.919.1% undervalued
81 followersusers have followed this narrative
0 commentsusers have commented on this narrative
6 likesusers have liked this narrative
OS
oscargarcia on NVIDIA ·
The company that went from selling GPUs to gamers to becoming the AI arms dealer of the 21st century.
Fair Value:US$28026.1% undervalued
186 followersusers have followed this narrative
9 commentsusers have commented on this narrative
15 likesusers have liked this narrative
BE
benjamin_lvieq on PayPal Holdings ·
PayPal: PayPal Doesn't Need to Grow – It Needs to Stop Falling – A Mispriced Cash Machine With a Cannibal Buyback
Fair Value:US$6513.6% undervalued
72 followersusers have followed this narrative
2 commentsusers have commented on this narrative
11 likesusers have liked this narrative
Trending Discussion
DE
derek_3wsdg on Teladoc Health ·
You’ve overlooked the activist investor factor. Travis Cocke’s Voss has announced 5% ownership through a 13G filing. They’ve added to that 5% since, and in doing so, have created a structural trap door for 27.42 Million Shares actively sold short. Chuck will announce lots of positives on July 29 but it’s what Voss announces shortly after that will rock the overextended Teledoc shorts. The Walmart partnership is the tip of the iceberg. The market is missing the sheer regulatory and enterprise friction of modern corporate healthcare. Teladoc isn't a "consumer app"; it is the primary digital infrastructure integrated directly into the legacy backends of Tier-1 insurance companies and fortune 500 employers, covering 105 million+ lives. Teladoc is acting as the digital top-of-funnel engine for the world's largest retailer. If Voss pushes the narrative that Teladoc is effectively the outsourced digital brain of Walmart's entire healthcare footprint, the fair value shifts from a basic health multiple to an enterprise distribution premium. Additionally , we are in a structural gold rush for high-quality, legally compliant, longitudinal medical data to train vertical healthcare AI models. Large technology hyperscalers and pharmaceutical giants cannot simply scrape the internet for this; they need structured clinical inputs. Teladoc sits on one of the largest de-identified virtual medical datasets on earth. From the activist playbook , we’ll see Voss demand the immediate creation of a Data & Diagnostics Licensing Division, transforming a legacy liability into an incredibly high-margin, pure-software data asset that requires zero human clinician hours to scale. Chuck is doing great work and deserves credi5 for the Teledoc turnaround but it will be Travis Cocke who will be responsible for a share price way beyond your $15 valuation.
1
|0
