Investors Will Want El-Mor Electric Installation & Services (1986)'s (TLV:ELMR) Growth In ROCE To Persist
If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, we've noticed some promising trends at El-Mor Electric Installation & Services (1986) (TLV:ELMR) so let's look a bit deeper.
Understanding 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 El-Mor Electric Installation & Services (1986):
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.19 = ₪63m ÷ (₪691m - ₪355m) (Based on the trailing twelve months to September 2025).
Thus, El-Mor Electric Installation & Services (1986) has an ROCE of 19%. On its own, that's a standard return, however it's much better than the 7.6% generated by the Construction industry.
View our latest analysis for El-Mor Electric Installation & Services (1986)
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're interested in investigating El-Mor Electric Installation & Services (1986)'s past further, check out this free graph covering El-Mor Electric Installation & Services (1986)'s past earnings, revenue and cash flow.
How Are Returns Trending?
El-Mor Electric Installation & Services (1986) is displaying some positive trends. The data shows that returns on capital have increased substantially over the last five years to 19%. 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 131%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.
On a side note, El-Mor Electric Installation & Services (1986)'s current liabilities are still rather high at 51% of total assets. This effectively means that suppliers (or short-term creditors) are funding a large portion of the business, so just be aware that this can introduce some elements of risk. While it's not necessarily a bad thing, it can be beneficial if this ratio is lower.
Our Take On El-Mor Electric Installation & Services (1986)'s ROCE
All in all, it's terrific to see that El-Mor Electric Installation & Services (1986) is reaping the rewards from prior investments and is growing its capital base. And a remarkable 333% total return over the last five years tells us that investors are expecting more good things to come in the future. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.
One more thing to note, we've identified 1 warning sign with El-Mor Electric Installation & Services (1986) and understanding this should be part of your investment process.
While El-Mor Electric Installation & Services (1986) isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.
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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.