Yahoo Finance Why We Like The Returns At Ituran Location and Control (NASDAQ:ITRN)
What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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. And in light of that, the trends we're seeing at Ituran Location and Control's (NASDAQ:ITRN) look very promising so lets take a look.
Understanding Return On Capital Employed (ROCE)
For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for Ituran Location and Control:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.29 = US$67m ÷ (US$321m - US$93m) (Based on the trailing twelve months to March 2024).
Therefore, Ituran Location and Control has an ROCE of 29%. In absolute terms that's a great return and it's even better than the Communications industry average of 8.1%.
View our latest analysis for Ituran Location and Control
Historical performance is a great place to start when researching a stock so above you can see the gauge for Ituran Location and Control's ROCE against it's prior returns. If you're interested in investigating Ituran Location and Control's past further, check out this free graph covering Ituran Location and Control's past earnings, revenue and cash flow.
What Does the ROCE Trend For Ituran Location and Control Tell Us?
Ituran Location and Control's ROCE growth is quite impressive. The figures show that over the last five years, ROCE has grown 35% whilst employing roughly the same amount of capital. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.
In Conclusion...
To sum it up, Ituran Location and Control is collecting higher returns from the same amount of capital, and that's impressive. Since the total return from the stock has been almost flat over the last five years, there might be an opportunity here if the valuation looks good. So researching this company further and determining whether or not these trends will continue seems justified.
Ituran Location and Control does have some risks though, and we've spotted 1 warning sign for Ituran Location and Control that you might be interested in.
High returns are a key ingredient to strong performance, so check out our free list ofstocks 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.
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