Tigbur - Temporary Professional Personnel (TLV:TIGBUR) Knows How To Allocate Capital Effectively

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding 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 Tigbur - Temporary Professional Personnel (TLV:TIGBUR) looks great, so lets see what the trend can tell us.

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. To calculate this metric for Tigbur - Temporary Professional Personnel, this is the formula:

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

0.26 = ₪45m ÷ (₪430m - ₪253m) (Based on the trailing twelve months to September 2023).

So, Tigbur - Temporary Professional Personnel has an ROCE of 26%. In absolute terms that's a great return and it's even better than the Professional Services industry average of 13%.

Check out our latest analysis for Tigbur - Temporary Professional Personnel

Historical performance is a great place to start when researching a stock so above you can see the gauge for Tigbur - Temporary Professional Personnel's ROCE against it's prior returns. If you'd like to look at how Tigbur - Temporary Professional Personnel has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

What Can We Tell From Tigbur - Temporary Professional Personnel's ROCE Trend?

Tigbur - Temporary Professional Personnel is displaying some positive trends. Over the last five years, returns on capital employed have risen substantially to 26%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 49%. So we're very much inspired by what we're seeing at Tigbur - Temporary Professional Personnel thanks to its ability to profitably reinvest capital.

Another thing to note, Tigbur - Temporary Professional Personnel has a high ratio of current liabilities to total assets of 59%. 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. Ideally we'd like to see this reduce as that would mean fewer obligations bearing risks.

What We Can Learn From Tigbur - Temporary Professional Personnel's ROCE

All in all, it's terrific to see that Tigbur - Temporary Professional Personnel is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 365% to shareholders over the last five years, it looks like investors are recognizing these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 2 warning signs for Tigbur - Temporary Professional Personnel (of which 1 is potentially serious!) that you should know about.

High returns are a key ingredient to strong performance, so check out our free list ofstocks 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.