The Returns On Capital At Titanium Transportation Group (TSE:TTNM) Don't Inspire Confidence

What are the early trends we should look for to identify a stock that could 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. In light of that, when we looked at Titanium Transportation Group (TSE:TTNM) and its ROCE trend, we weren't exactly thrilled.

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 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%. Ultimately, that's a low return and it under-performs the Logistics industry average of 9.9%.

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're interested, you can view the analysts predictions in our free analyst report for Titanium Transportation Group .

The Trend Of ROCE

On the surface, the trend of ROCE at Titanium Transportation Group doesn't inspire confidence. Around five years ago the returns on capital were 6.0%, but since then they've fallen to 3.8%. However it looks like Titanium Transportation Group might be reinvesting for long term growth because while capital employed has increased, the company's sales haven't changed much in the last 12 months. It may take some time before the company starts to see any change in earnings from these investments.

The Key Takeaway

To conclude, we've found that Titanium Transportation Group is reinvesting in the business, but returns have been falling. And investors may be recognizing these trends since the stock has only returned a total of 16% to shareholders over the last five years. So if you're looking for a multi-bagger, the underlying trends indicate you may have better chances elsewhere.

Titanium Transportation Group does come with some risks though, we found 3 warning signs in our investment analysis, and 2 of those can't be ignored...

While Titanium Transportation Group may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.