Returns Are Gaining Momentum At Rami Levi Chain Stores Hashikma Marketing 2006 (TLV:RMLI)
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. 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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. With that in mind, we've noticed some promising trends at Rami Levi Chain Stores Hashikma Marketing 2006 (TLV:RMLI) so let's look a bit deeper.
Return On Capital Employed (ROCE): What Is It?
For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. To calculate this metric for Rami Levi Chain Stores Hashikma Marketing 2006, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.15 = ₪376m ÷ (₪4.6b - ₪2.1b) (Based on the trailing twelve months to September 2025).
Therefore, Rami Levi Chain Stores Hashikma Marketing 2006 has an ROCE of 15%. In absolute terms, that's a satisfactory return, but compared to the Consumer Retailing industry average of 11% it's much better.
See our latest analysis for Rami Levi Chain Stores Hashikma Marketing 2006
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'd like to look at how Rami Levi Chain Stores Hashikma Marketing 2006 has performed in the past in other metrics, you can view this free graph of Rami Levi Chain Stores Hashikma Marketing 2006's past earnings, revenue and cash flow.
What Can We Tell From Rami Levi Chain Stores Hashikma Marketing 2006's ROCE Trend?
Rami Levi Chain Stores Hashikma Marketing 2006 has not disappointed with their ROCE growth. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 40% in that same time. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. It's worth looking deeper into this though because while it's great that the business is more efficient, it might also mean that going forward the areas to invest internally for the organic growth are lacking.
Another thing to note, Rami Levi Chain Stores Hashikma Marketing 2006 has a high ratio of current liabilities to total assets of 45%. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. While it's not necessarily a bad thing, it can be beneficial if this ratio is lower.
In Conclusion...
To bring it all together, Rami Levi Chain Stores Hashikma Marketing 2006 has done well to increase the returns it's generating from its capital employed. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. 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 Rami Levi Chain Stores Hashikma Marketing 2006, we've discovered 1 warning sign that you should be aware of.
While Rami Levi Chain Stores Hashikma Marketing 2006 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.