Returns At TaskUs (NASDAQ:TASK) Are On The Way Up

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So when we looked at TaskUs (NASDAQ:TASK) and its trend of ROCE, we really liked what we saw.

Understanding 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. The formula for this calculation on TaskUs is:

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

0.13 = US$102m ÷ (US$871m - US$111m) (Based on the trailing twelve months to September 2023).

Thus, TaskUs has an ROCE of 13%. By itself that's a normal return on capital and it's in line with the industry's average returns of 13%.

See our latest analysis for TaskUs

Above you can see how the current ROCE for TaskUs compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering TaskUs here for free.

How Are Returns Trending?

The trends we've noticed at TaskUs are quite reassuring. Over the last four years, returns on capital employed have risen substantially to 13%. The amount of capital employed has increased too, by 35%. So we're very much inspired by what we're seeing at TaskUs thanks to its ability to profitably reinvest capital.

Our Take On TaskUs' ROCE

In summary, it's great to see that TaskUs can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. Astute investors may have an opportunity here because the stock has declined 25% in the last year. So researching this company further and determining whether or not these trends will continue seems justified.

While TaskUs looks impressive, no company is worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether TASK is currently trading for a fair price.

While TaskUs 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.