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There are a few key trends to look for if we want to identify the next multi-bagger. 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. However, after investigating Titanium Transportation Group (TSE:TTNM), we don't think it's current trends fit the mold of a multi-bagger.
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. The formula for this calculation on Titanium Transportation Group is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.038 = CA$8.6m ÷ (CA$330m - CA$100m) (Based on the trailing twelve months to September 2024).
So, Titanium Transportation Group has an ROCE of 3.8%. In absolute terms, that's a low return and it also under-performs the Logistics industry average of 11%.
View our latest analysis for Titanium Transportation Group
Above you can see how the current ROCE for Titanium Transportation Group compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Titanium Transportation Group .
So How Is Titanium Transportation Group's ROCE Trending?
In terms of Titanium Transportation Group's historical ROCE movements, the trend isn't fantastic. Over the last five years, returns on capital have decreased to 3.8% from 6.0% five years ago. On the other hand, the company has been employing more capital without a corresponding improvement in sales in the last year, which could suggest these investments are longer term plays. It may take some time before the company starts to see any change in earnings from these investments.
The Bottom Line
To conclude, we've found that Titanium Transportation Group is reinvesting in the business, but returns have been falling. Although the market must be expecting these trends to improve because the stock has gained 72% over the last five years. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.
Titanium Transportation Group does come with some risks though, we found 3 warning signs in our investment analysis, and 2 of those don't sit too well with us...