The Return Trends At Tantalus Systems Holding (TSE:GRID) Look Promising

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Speaking of which, we noticed some great changes in Tantalus Systems Holding's (TSE:GRID) returns on capital, so let's have a look.

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Return On Capital Employed (ROCE): What Is It?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Tantalus Systems Holding:

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

0.0074 = US$96k ÷ (US$39m - US$26m) (Based on the trailing twelve months to June 2025).

Therefore, Tantalus Systems Holding has an ROCE of 0.7%. In absolute terms, that's a low return and it also under-performs the Electronic industry average of 8.9%.

Check out our latest analysis for Tantalus Systems Holding

Above you can see how the current ROCE for Tantalus Systems Holding compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Tantalus Systems Holding .

What Does the ROCE Trend For Tantalus Systems Holding Tell Us?

Tantalus Systems Holding has recently broken into profitability so their prior investments seem to be paying off. The company was generating losses four years ago, but now it's earning 0.7% which is a sight for sore eyes. Not only that, but the company is utilizing 114% more capital than before, but that's to be expected from a company trying to break into profitability. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.

On a related note, the company's ratio of current liabilities to total assets has decreased to 67%, which basically reduces it's funding from the likes of short-term creditors or suppliers. This tells us that Tantalus Systems Holding has grown its returns without a reliance on increasing their current liabilities, which we're very happy with. Nevertheless, there are some potential risks the company is bearing with current liabilities that high, so just keep that in mind.

What We Can Learn From Tantalus Systems Holding's ROCE

In summary, it's great to see that Tantalus Systems Holding has managed to break into profitability and is continuing to reinvest in its business. And a remarkable 174% total return over the last three years tells us that investors are expecting more good things to come in the future. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

If you want to continue researching Tantalus Systems Holding, you might be interested to know about the 1 warning sign that our analysis has discovered.

While Tantalus Systems Holding isn't earning the highest return, check out this free list of companies that are 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.