TTK Prestige (NSE:TTKPRESTIG) Could Become 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. With that in mind, the ROCE of TTK Prestige (NSE:TTKPRESTIG) looks great, so lets see what the trend can tell us.

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. Analysts use this formula to calculate it for TTK Prestige:

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

0.23 = ₹4.2b ÷ (₹24b - ₹6.0b) (Based on the trailing twelve months to June 2022).

Thus, TTK Prestige has an ROCE of 23%. That's a fantastic return and not only that, it outpaces the average of 16% earned by companies in a similar industry.

View our latest analysis for TTK Prestige

Above you can see how the current ROCE for TTK Prestige 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 report on analyst forecasts for the company.

So How Is TTK Prestige's ROCE Trending?

The trends we've noticed at TTK Prestige are quite reassuring. The data shows that returns on capital have increased substantially over the last five years to 23%. Basically the business is earning more per dollar of capital invested and in addition to that, 80% more capital is being employed now too. So we're very much inspired by what we're seeing at TTK Prestige thanks to its ability to profitably reinvest capital.

The Bottom Line

In summary, it's great to see that TTK Prestige can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 98% return over the last five years. Therefore, we think it would be worth your time to check if these trends are going to continue.

Like most companies, TTK Prestige does come with some risks, and we've found 1 warning sign that you should be aware of.

TTK Prestige is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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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.