Tantech Holdings (NASDAQ:TANH) Might Have The Makings Of A Multi-Bagger

What are the early trends we should look for to identify a stock that could multiply in value over the long term? 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Speaking of which, we noticed some great changes in Tantech Holdings' (NASDAQ:TANH) returns on capital, so let's have a look.

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Return On Capital Employed (ROCE): What Is It?

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. To calculate this metric for Tantech Holdings, this is the formula:

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

0.03 = US$4.0m ÷ (US$143m - US$12m) (Based on the trailing twelve months to December 2024).

Thus, Tantech Holdings has an ROCE of 3.0%. In absolute terms, that's a low return and it also under-performs the Chemicals industry average of 9.2%.

View our latest analysis for Tantech Holdings

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 want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Tantech Holdings.

What Does the ROCE Trend For Tantech Holdings Tell Us?

While in absolute terms it isn't a high ROCE, it's promising to see that it has been moving in the right direction. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 3.0%. The amount of capital employed has increased too, by 36%. So we're very much inspired by what we're seeing at Tantech Holdings thanks to its ability to profitably reinvest capital.

In Conclusion...

All in all, it's terrific to see that Tantech Holdings is reaping the rewards from prior investments and is growing its capital base. Although the company may be facing some issues elsewhere since the stock has plunged 100% in the last five years. In any case, we believe the economic trends of this company are positive and looking into the stock further could prove rewarding.

One more thing, we've spotted 2 warning signs facing Tantech Holdings that you might find interesting.

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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.