Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Speaking of which, we noticed some great changes in Tashin Holdings Berhad's (KLSE:TASHIN) returns on capital, so let's have a look.
Return On Capital Employed (ROCE): What Is It?
Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for Tashin Holdings Berhad, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.24 = RM73m ÷ (RM445m - RM142m) (Based on the trailing twelve months to June 2022).
Therefore, Tashin Holdings Berhad has an ROCE of 24%. In absolute terms that's a great return and it's even better than the Metals and Mining industry average of 13%.
Check out our latest analysis for Tashin Holdings Berhad
Historical performance is a great place to start when researching a stock so above you can see the gauge for Tashin Holdings Berhad's ROCE against it's prior returns. If you'd like to look at how Tashin Holdings Berhad has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.
The Trend Of ROCE
Investors would be pleased with what's happening at Tashin Holdings Berhad. Over the last five years, returns on capital employed have risen substantially to 24%. The amount of capital employed has increased too, by 121%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.
The Bottom Line
In summary, it's great to see that Tashin Holdings Berhad can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. Considering the stock has delivered 22% to its stockholders over the last three years, it may be fair to think that investors aren't fully aware of the promising trends yet. So exploring more about this stock could uncover a good opportunity, if the valuation and other metrics stack up.
Tashin Holdings Berhad does come with some risks though, we found 3 warning signs in our investment analysis, and 1 of those makes us a bit uncomfortable...