Return Trends At TFF Group (EPA:TFF) Aren't Appealing

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? 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. With that in mind, the ROCE of TFF Group (EPA:TFF) looks decent, right now, so lets see what the trend of returns can tell us.

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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. The formula for this calculation on TFF Group is:

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

0.13 = €79m ÷ (€1.0b - €377m) (Based on the trailing twelve months to October 2024).

So, TFF Group has an ROCE of 13%. On its own, that's a standard return, however it's much better than the 9.5% generated by the Packaging industry.

View our latest analysis for TFF Group

Above you can see how the current ROCE for TFF Group 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 TFF Group for free.

What Does the ROCE Trend For TFF Group Tell Us?

The trend of ROCE doesn't stand out much, but returns on a whole are decent. The company has consistently earned 13% for the last five years, and the capital employed within the business has risen 49% in that time. 13% is a pretty standard return, and it provides some comfort knowing that TFF Group has consistently earned this amount. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

The Key Takeaway

To sum it up, TFF Group has simply been reinvesting capital steadily, at those decent rates of return. Yet over the last five years the stock has declined 10%, so the decline might provide an opening. For that reason, savvy investors might want to look further into this company in case it's a prime investment.

If you want to know some of the risks facing TFF Group we've found 2 warning signs (1 is a bit concerning!) that you should be aware of before investing here.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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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.