What Can The Trends At Unitronics (1989) (RG) (TLV:UNIT) Tell Us About Their Returns?

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. With that in mind, we've noticed some promising trends at Unitronics (1989) (RG) (TLV:UNIT) so let's look a bit deeper.

Return On Capital Employed (ROCE): What is it?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested 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)

0.17 = ₪15m ÷ (₪131m - ₪39m) (Based on the trailing twelve months to September 2020).

So, Unitronics (1989) (RG) has an ROCE of 17%. In absolute terms, that's a satisfactory return, but compared to the Electronic industry average of 12% it's much better.

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

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 want to delve into the historical earnings, revenue and cash flow of Unitronics (1989) (RG), check out these free graphs here.

So How Is Unitronics (1989) (RG)'s ROCE Trending?

Unitronics (1989) (RG) has not disappointed in regards to ROCE growth. The data shows that returns on capital have increased by 42% over the trailing five years. That's a very favorable trend because this means that the company is earning more per dollar of capital that's being employed. In regards to capital employed, Unitronics (1989) (RG) appears to been achieving more with less, since the business is using 35% less capital to run its operation. Unitronics (1989) (RG) may be selling some assets so it's worth investigating if the business has plans for future investments to increase returns further still.

What We Can Learn From Unitronics (1989) (RG)'s ROCE

In a nutshell, we're pleased to see that Unitronics (1989) (RG) has been able to generate higher returns from less capital. And since the stock has fallen 49% over the last five years, there might be an opportunity here. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

One more thing to note, we've identified 2 warning signs with Unitronics (1989) (RG) and understanding these should be part of your investment process.

While Unitronics (1989) (RG) 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.

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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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