Is Tasty Bite Eatables (NSE:TASTYBITE) Likely To Turn Things Around?

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Although, when we looked at Tasty Bite Eatables (NSE:TASTYBITE), it didn't seem to tick all of these boxes.

Return On Capital Employed (ROCE): What is it?

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 Tasty Bite Eatables, this is the formula:

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

0.14 = ₹281m ÷ (₹3.0b - ₹1.0b) (Based on the trailing twelve months to March 2020).

Therefore, Tasty Bite Eatables has an ROCE of 14%. That's a relatively normal return on capital, and it's around the 13% generated by the Food industry.

View our latest analysis for Tasty Bite Eatables

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

The Trend Of ROCE

Unfortunately, the trend isn't great with ROCE falling from 25% five years ago, while capital employed has grown 179%. Usually this isn't ideal, but given Tasty Bite Eatables conducted a capital raising before their most recent earnings announcement, that would've likely contributed, at least partially, to the increased capital employed figure. Tasty Bite Eatables probably hasn't received a full year of earnings yet from the new funds it raised, so these figures should be taken with a grain of salt.

The Bottom Line

In summary, despite lower returns in the short term, we're encouraged to see that Tasty Bite Eatables is reinvesting for growth and has higher sales as a result. And long term investors must be optimistic going forward because the stock has returned a huge 133% to shareholders in the last three years. So should these growth trends continue, we'd be optimistic on the stock going forward.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 2 warning signs for Tasty Bite Eatables (of which 1 can't be ignored!) that you should know about.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

If you decide to trade Tasty Bite Eatables, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted

This article by Simply Wall St is general in nature. 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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

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