The Trend Of High Returns At Unitronics (1989) (RG) (TLV:UNIT) Has Us Very Interested

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's 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. And in light of that, the trends we're seeing at Unitronics (1989) (RG)'s (TLV:UNIT) look very promising so lets take a look.

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. Analysts use this formula to calculate it for Unitronics (1989) (RG):

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

0.24 = ₪23m ÷ (₪153m - ₪58m) (Based on the trailing twelve months to December 2022).

Therefore, Unitronics (1989) (RG) has an ROCE of 24%. That's a fantastic return and not only that, it outpaces the average of 13% earned by companies in a similar industry.

View our latest analysis for Unitronics (1989) (RG)

Historical performance is a great place to start when researching a stock so above you can see the gauge for Unitronics (1989) (RG)'s ROCE against it's prior returns. If you'd like to look at how Unitronics (1989) (RG) has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

SWOT Analysis for Unitronics (1989) (RG)

What Does the ROCE Trend For Unitronics (1989) (RG) Tell Us?

Unitronics (1989) (RG) has not disappointed in regards to ROCE growth. The data shows that returns on capital have increased by 165% over the trailing five years. That's not bad because this tells for every dollar invested (capital employed), the company is increasing the amount earned from that dollar. Interestingly, the business may be becoming more efficient because it's applying 41% less capital than it was five years ago. A business that's shrinking its asset base like this isn't usually typical of a soon to be multi-bagger company.

In Conclusion...

From what we've seen above, Unitronics (1989) (RG) has managed to increase it's returns on capital all the while reducing it's capital base. Investors may not be impressed by the favorable underlying trends yet because over the last five years the stock has only returned 7.0% to shareholders. So with that in mind, we think the stock deserves further research.

One more thing: We've identified 3 warning signs with Unitronics (1989) (RG) (at least 1 which is potentially serious) , and understanding them would certainly be useful.

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. 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.