Returns On Capital At Tashin Holdings Berhad (KLSE:TASHIN) Paint A Concerning Picture

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, 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. However, after investigating Tashin Holdings Berhad (KLSE:TASHIN), we don't think it's current trends fit the mold of a multi-bagger.

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 Tashin Holdings Berhad:

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

0.018 = RM5.0m ÷ (RM349m - RM71m) (Based on the trailing twelve months to September 2024).

Therefore, Tashin Holdings Berhad has an ROCE of 1.8%. In absolute terms, that's a low return and it also under-performs the Metals and Mining industry average of 6.8%.

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're interested in investigating Tashin Holdings Berhad's past further, check out this free graph covering Tashin Holdings Berhad's past earnings, revenue and cash flow.

How Are Returns Trending?

In terms of Tashin Holdings Berhad's historical ROCE movements, the trend isn't fantastic. To be more specific, ROCE has fallen from 2.3% over the last five years. Meanwhile, the business is utilizing more capital but this hasn't moved the needle much in terms of sales in the past 12 months, so this could reflect longer term investments. It's worth keeping an eye on the company's earnings from here on to see if these investments do end up contributing to the bottom line.

The Bottom Line

In summary, Tashin Holdings Berhad is reinvesting funds back into the business for growth but unfortunately it looks like sales haven't increased much just yet. Unsurprisingly, the stock has only gained 39% over the last five years, which potentially indicates that investors are accounting for this going forward. So if you're looking for a multi-bagger, the underlying trends indicate you may have better chances elsewhere.

On a final note, we found 4 warning signs for Tashin Holdings Berhad (1 doesn't sit too well with us) you should be aware of.

While Tashin Holdings Berhad 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.