Returns At Tashin Holdings Berhad (KLSE:TASHIN) Are On The Way Up

If you're looking for a multi-bagger, there's a few things to 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. So when we looked at Tashin Holdings Berhad (KLSE:TASHIN) and its trend of ROCE, we really liked what we saw.

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. Analysts use this formula to calculate it for Tashin Holdings Berhad:

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

0.12 = RM26m ÷ (RM306m - RM87m) (Based on the trailing twelve months to March 2021).

Therefore, Tashin Holdings Berhad has an ROCE of 12%. On its own, that's a standard return, however it's much better than the 6.7% generated by the Metals and Mining industry.

See our latest analysis for Tashin Holdings Berhad

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

What Does the ROCE Trend For Tashin Holdings Berhad Tell Us?

Investors would be pleased with what's happening at Tashin Holdings Berhad. The data shows that returns on capital have increased substantially over the last five years to 12%. 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 92%. So we're very much inspired by what we're seeing at Tashin Holdings Berhad thanks to its ability to profitably reinvest capital.

In another part of our analysis, we noticed that the company's ratio of current liabilities to total assets decreased to 28%, which broadly means the business is relying less on its suppliers or short-term creditors to fund its operations. So this improvement in ROCE has come from the business' underlying economics, which is great to see.

Our Take On Tashin Holdings Berhad's ROCE

To sum it up, Tashin Holdings Berhad has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Since the stock has returned a staggering 231% to shareholders over the last year, it looks like investors are recognizing these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

One more thing: We've identified 3 warning signs with Tashin Holdings Berhad (at least 1 which shouldn't be ignored) , and understanding them would certainly be useful.

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.

When trading stocks or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide 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 (at) simplywallst.com.