There's Been No Shortage Of Growth Recently For Enlight Renewable Energy's (TLV:ENLT) Returns On Capital

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount 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. Speaking of which, we noticed some great changes in Enlight Renewable Energy's (TLV:ENLT) returns on capital, so let's have a look.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

What Is Return On Capital Employed (ROCE)?

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. The formula for this calculation on Enlight Renewable Energy is:

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

0.033 = US$177m ÷ (US$5.9b - US$516m) (Based on the trailing twelve months to March 2025).

Thus, Enlight Renewable Energy has an ROCE of 3.3%. On its own that's a low return on capital but it's in line with the industry's average returns of 2.5%.

Check out our latest analysis for Enlight Renewable Energy

Above you can see how the current ROCE for Enlight Renewable Energy compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Enlight Renewable Energy .

The Trend Of ROCE

While in absolute terms it isn't a high ROCE, it's promising to see that it has been moving in the right direction. Over the last five years, returns on capital employed have risen substantially to 3.3%. 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 359%. So we're very much inspired by what we're seeing at Enlight Renewable Energy thanks to its ability to profitably reinvest capital.

The Key Takeaway

In summary, it's great to see that Enlight Renewable Energy 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 investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 70% return over the last five years. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

Enlight Renewable Energy does have some risks though, and we've spotted 3 warning signs for Enlight Renewable Energy that you might be interested in.

While Enlight Renewable Energy 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.

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.