We Like These Underlying Return On Capital Trends At Bezeq The Israel Telecommunication (TLV:BEZQ)

There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Speaking of which, we noticed some great changes in Bezeq The Israel Telecommunication's (TLV:BEZQ) returns on capital, so let's have a look.

What Is Return On Capital Employed (ROCE)?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. To calculate this metric for Bezeq The Israel Telecommunication, this is the formula:

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

0.18 = ₪1.9b ÷ (₪15b - ₪4.2b) (Based on the trailing twelve months to September 2023).

Therefore, Bezeq The Israel Telecommunication has an ROCE of 18%. In absolute terms, that's a satisfactory return, but compared to the Telecom industry average of 12% it's much better.

Check out our latest analysis for Bezeq The Israel Telecommunication

Above you can see how the current ROCE for Bezeq The Israel Telecommunication compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Bezeq The Israel Telecommunication here for free.

What Can We Tell From Bezeq The Israel Telecommunication's ROCE Trend?

You'd find it hard not to be impressed with the ROCE trend at Bezeq The Israel Telecommunication. The figures show that over the last five years, returns on capital have grown by 37%. The company is now earning ₪0.2 per dollar of capital employed. Speaking of capital employed, the company is actually utilizing 23% less than it was five years ago, which can be indicative of a business that's improving its efficiency. Bezeq The Israel Telecommunication may be selling some assets so it's worth investigating if the business has plans for future investments to increase returns further still.

The Bottom Line On Bezeq The Israel Telecommunication's ROCE

In a nutshell, we're pleased to see that Bezeq The Israel Telecommunication has been able to generate higher returns from less capital. Since the stock has returned a solid 55% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

If you'd like to know about the risks facing Bezeq The Israel Telecommunication, we've discovered 2 warning signs that you should be aware of.

While Bezeq The Israel Telecommunication 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. 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.