Yahoo News Returns At TAS Offshore Berhad (KLSE:TAS) Are On The Way Up
What are the early trends we should look for to identify a stock that could multiply in value over the long term? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Speaking of which, we noticed some great changes in TAS Offshore Berhad's (KLSE:TAS) returns on capital, so let's have a look.
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. The formula for this calculation on TAS Offshore Berhad is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) Ă· (Total Assets - Current Liabilities)
0.17 = RM17m Ă· (RM152m - RM53m) (Based on the trailing twelve months to May 2023).
So, TAS Offshore Berhad has an ROCE of 17%. On its own, that's a standard return, however it's much better than the 9.7% generated by the Machinery industry.
View our latest analysis for TAS Offshore Berhad
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're interested in investigating TAS Offshore Berhad's past further, check out this free graph of past earnings, revenue and cash flow.
What Can We Tell From TAS Offshore Berhad's ROCE Trend?
You'd find it hard not to be impressed with the ROCE trend at TAS Offshore Berhad. We found that the returns on capital employed over the last five years have risen by 587%. The company is now earning RM0.2 per dollar of capital employed. Speaking of capital employed, the company is actually utilizing 39% less than it was five years ago, which can be indicative of a business that's improving its efficiency. If this trend continues, the business might be getting more efficient but it's shrinking in terms of total assets.
One more thing to note, TAS Offshore Berhad has decreased current liabilities to 35% of total assets over this period, which effectively reduces the amount of funding from suppliers or short-term creditors. So this improvement in ROCE has come from the business' underlying economics, which is great to see.
What We Can Learn From TAS Offshore Berhad's ROCE
In a nutshell, we're pleased to see that TAS Offshore Berhad has been able to generate higher returns from less capital. Since the stock has only returned 14% to shareholders over the last five years, the promising fundamentals may not be recognized yet by investors. Given that, we'd look further into this stock in case it has more traits that could make it multiply in the long term.
If you want to know some of the risks facing TAS Offshore Berhad we've found 3 warning signs (1 is a bit concerning!) that you should be aware of before investing here.
For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.
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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.
