If you're looking for a multi-bagger, there's a few things to 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So when we looked at Ta Ann Holdings Berhad (KLSE:TAANN) and its trend of ROCE, we really liked what we saw.

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. The formula for this calculation on Ta Ann Holdings Berhad is:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.11 = RM252m ÷ (RM2.7b - RM377m) (Based on the trailing twelve months to June 2024).

Therefore, Ta Ann Holdings Berhad has an ROCE of 11%. On its own, that's a standard return, however it's much better than the 8.8% generated by the Food industry.

See our latest analysis for Ta Ann Holdings Berhad

Above you can see how the current ROCE for Ta Ann Holdings Berhad compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Ta Ann Holdings Berhad for free.

What Can We Tell From Ta Ann Holdings Berhad's ROCE Trend?

Ta Ann Holdings Berhad's ROCE growth is quite impressive. The figures show that over the last five years, ROCE has grown 129% whilst employing roughly the same amount of capital. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. 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 bring it all together, Ta Ann Holdings Berhad 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 Ta Ann Holdings Berhad, we've discovered 1 warning sign that you should be aware of.