Tiv Taam Holdings 1 (TLV:TTAM) Might Have The Makings Of A Multi-Bagger

There are a few key trends to look for if we want to identify the next multi-bagger. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Speaking of which, we noticed some great changes in Tiv Taam Holdings 1's (TLV:TTAM) returns on capital, so let's have a look.

What Is Return On Capital Employed (ROCE)?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. To calculate this metric for Tiv Taam Holdings 1, this is the formula:

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

0.11 = ₪93m ÷ (₪1.3b - ₪401m) (Based on the trailing twelve months to September 2023).

Thus, Tiv Taam Holdings 1 has an ROCE of 11%. In absolute terms, that's a satisfactory return, but compared to the Consumer Retailing industry average of 7.8% it's much better.

Check out our latest analysis for Tiv Taam Holdings 1

Historical performance is a great place to start when researching a stock so above you can see the gauge for Tiv Taam Holdings 1's ROCE against it's prior returns. If you're interested in investigating Tiv Taam Holdings 1's past further, check out this free graph of past earnings, revenue and cash flow.

What Can We Tell From Tiv Taam Holdings 1's ROCE Trend?

Investors would be pleased with what's happening at Tiv Taam Holdings 1. Over the last five years, returns on capital employed have risen substantially to 11%. 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 147%. So we're very much inspired by what we're seeing at Tiv Taam Holdings 1 thanks to its ability to profitably reinvest capital.

On a related note, the company's ratio of current liabilities to total assets has decreased to 32%, which basically reduces it's funding from the likes of short-term creditors or suppliers. This tells us that Tiv Taam Holdings 1 has grown its returns without a reliance on increasing their current liabilities, which we're very happy with.

The Bottom Line

All in all, it's terrific to see that Tiv Taam Holdings 1 is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 169% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if Tiv Taam Holdings 1 can keep these trends up, it could have a bright future ahead.

One more thing to note, we've identified 1 warning sign with Tiv Taam Holdings 1 and understanding it should be part of your investment process.

While Tiv Taam Holdings 1 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.