Returns On Capital At Sunflower Sustainable Investments (TLV:SNFL) Have Hit The Brakes

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. However, after briefly looking over the numbers, we don't think Sunflower Sustainable Investments (TLV:SNFL) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

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Return On Capital Employed (ROCE): What Is It?

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 Sunflower Sustainable Investments, this is the formula:

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

0.08 = ₪60m ÷ (₪822m - ₪78m) (Based on the trailing twelve months to March 2025).

Thus, Sunflower Sustainable Investments has an ROCE of 8.0%. In absolute terms, that's a low return, but it's much better than the Renewable Energy industry average of 2.5%.

Check out our latest analysis for Sunflower Sustainable Investments

Historical performance is a great place to start when researching a stock so above you can see the gauge for Sunflower Sustainable Investments' ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Sunflower Sustainable Investments.

So How Is Sunflower Sustainable Investments' ROCE Trending?

There are better returns on capital out there than what we're seeing at Sunflower Sustainable Investments. The company has consistently earned 8.0% for the last five years, and the capital employed within the business has risen 104% in that time. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

The Bottom Line On Sunflower Sustainable Investments' ROCE

Long story short, while Sunflower Sustainable Investments has been reinvesting its capital, the returns that it's generating haven't increased. Unsurprisingly, the stock has only gained 3.2% over the last five years, which potentially indicates that investors are accounting for this going forward. As a result, if you're hunting for a multi-bagger, we think you'd have more luck elsewhere.

One more thing, we've spotted 1 warning sign facing Sunflower Sustainable Investments that you might find interesting.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.