Tasty Bite Eatables (NSE:TASTYBITE) Is Reinvesting At Lower Rates Of Return

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. However, after investigating Tasty Bite Eatables (NSE:TASTYBITE), we don't think it's current trends fit the mold of a multi-bagger.

What is Return On Capital Employed (ROCE)?

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 Tasty Bite Eatables is:

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

0.07 = ₹228m ÷ (₹4.3b - ₹1.1b) (Based on the trailing twelve months to March 2022).

So, Tasty Bite Eatables has an ROCE of 7.0%. In absolute terms, that's a low return and it also under-performs the Food industry average of 12%.

See our latest analysis for Tasty Bite Eatables

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you're interested in investigating Tasty Bite Eatables' past further, check out this free graph of past earnings, revenue and cash flow.

What Does the ROCE Trend For Tasty Bite Eatables Tell Us?

In terms of Tasty Bite Eatables' historical ROCE movements, the trend isn't fantastic. To be more specific, ROCE has fallen from 29% over the last five years. However it looks like Tasty Bite Eatables might be reinvesting for long term growth because while capital employed has increased, the company's sales haven't changed much in the last 12 months. It may take some time before the company starts to see any change in earnings from these investments.

Our Take On Tasty Bite Eatables' ROCE

To conclude, we've found that Tasty Bite Eatables is reinvesting in the business, but returns have been falling. Although the market must be expecting these trends to improve because the stock has gained 71% over the last five years. But if the trajectory of these underlying trends continue, we think the likelihood of it being a multi-bagger from here isn't high.

Tasty Bite Eatables does have some risks though, and we've spotted 2 warning signs for Tasty Bite Eatables that you might be interested in.

While Tasty Bite Eatables isn't earning the highest return, check out this free list of companies that are 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.