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If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. 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. However, after briefly looking over the numbers, we don't think Thunderbird Entertainment Group (CVE:TBRD) has the makings of a multi-bagger going forward, but let's have a look at why that may be.
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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. The formula for this calculation on Thunderbird Entertainment Group is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.088 = CA$8.1m ÷ (CA$188m - CA$97m) (Based on the trailing twelve months to December 2024).
Therefore, Thunderbird Entertainment Group has an ROCE of 8.8%. On its own, that's a low figure but it's around the 9.9% average generated by the Entertainment industry.
Check out our latest analysis for Thunderbird Entertainment Group
Above you can see how the current ROCE for Thunderbird Entertainment 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 Thunderbird Entertainment Group .
What Can We Tell From Thunderbird Entertainment Group's ROCE Trend?
In terms of Thunderbird Entertainment Group's historical ROCE trend, it doesn't exactly demand attention. Over the past five years, ROCE has remained relatively flat at around 8.8% and the business has deployed 24% more capital into its operations. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.
On a side note, Thunderbird Entertainment Group's current liabilities are still rather high at 51% of total assets. This effectively means that suppliers (or short-term creditors) are funding a large portion of the business, so just be aware that this can introduce some elements of risk. While it's not necessarily a bad thing, it can be beneficial if this ratio is lower.