Triumph Group (NYSE:TGI) Might Have The Makings Of A Multi-Bagger

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, Triumph Group (NYSE:TGI) looks quite promising in regards to its trends of return on capital.

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 Triumph Group is:

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

0.12 = US$161m ÷ (US$1.7b - US$397m) (Based on the trailing twelve months to March 2023).

So, Triumph Group has an ROCE of 12%. On its own, that's a standard return, however it's much better than the 9.9% generated by the Aerospace & Defense industry.

See our latest analysis for Triumph Group

Above you can see how the current ROCE for Triumph Group 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.

SWOT Analysis for Triumph Group

What The Trend Of ROCE Can Tell Us

We're pretty happy with how the ROCE has been trending at Triumph Group. The data shows that returns on capital have increased by 58% over the trailing five years. The company is now earning US$0.1 per dollar of capital employed. In regards to capital employed, Triumph Group appears to been achieving more with less, since the business is using 53% less capital to run its operation. Triumph Group may be selling some assets so it's worth investigating if the business has plans for future investments to increase returns further still.

The Key Takeaway

In a nutshell, we're pleased to see that Triumph Group has been able to generate higher returns from less capital. Astute investors may have an opportunity here because the stock has declined 42% in the last five years. With that in mind, we believe the promising trends warrant this stock for further investigation.

On a final note, we've found 3 warning signs for Triumph Group that we think you should be aware of.

While Triumph Group may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.