Nasdaq
华尔街日报Returns On Capital Are Showing Encouraging Signs At E.S. Australia Israel Holdings (TLV:AUIS)
Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at E.S. Australia Israel Holdings (TLV:AUIS) and its trend of ROCE, we really liked what we saw.
What Is 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. To calculate this metric for E.S. Australia Israel Holdings, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.022 = ₪9.1m ÷ (₪520m - ₪105m) (Based on the trailing twelve months to June 2025).
Therefore, E.S. Australia Israel Holdings has an ROCE of 2.2%. In absolute terms, that's a low return and it also under-performs the Electrical industry average of 8.9%.
See our latest analysis for E.S. Australia Israel Holdings
Historical performance is a great place to start when researching a stock so above you can see the gauge for E.S. Australia Israel Holdings' ROCE against it's prior returns. If you're interested in investigating E.S. Australia Israel Holdings' past further, check out this free graph covering E.S. Australia Israel Holdings' past earnings, revenue and cash flow.
What Does the ROCE Trend For E.S. Australia Israel Holdings Tell Us?
We're glad to see that ROCE is heading in the right direction, even if it is still low at the moment. Over the last five years, returns on capital employed have risen substantially to 2.2%. The amount of capital employed has increased too, by 438%. So we're very much inspired by what we're seeing at E.S. Australia Israel Holdings thanks to its ability to profitably reinvest capital.
For the record though, there was a noticeable increase in the company's current liabilities over the period, so we would attribute some of the ROCE growth to that. Essentially the business now has suppliers or short-term creditors funding about 20% of its operations, which isn't ideal. Keep an eye out for future increases because when the ratio of current liabilities to total assets gets particularly high, this can introduce some new risks for the business.
Our Take On E.S. Australia Israel Holdings' ROCE
A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what E.S. Australia Israel Holdings has. And since the stock has fallen 30% over the last five years, there might be an opportunity here. With that in mind, we believe the promising trends warrant this stock for further investigation.
Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 5 warning signs for E.S. Australia Israel Holdings (of which 3 shouldn't be ignored!) that you should know about.
For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high 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.