Returns on equity for Taylor Devices ( NASDAQ:TAYD ) are on the rise

Did you know that there are certain financial metrics that can provide clues about a potential multi-bagger? Typically we will want to notice an upward trend return on capital employed (ROCE), and with it development base capital employed. This essentially means that the company has profitable initiatives in which it can continue to invest, which is the hallmark of a mixing machine. So on that note, Taylor devices (NASDAQ:TAYD) looks quite promising when it comes to return on equity trends.

What is return on capital employed (ROCE)?

To clarify, if you’re not sure, ROCE is a metric that allows you to assess how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for calculations on Taylor devices is:

Return on capital employed = Earnings before interest and tax (EBIT) ÷ (Total assets – Short-term liabilities)

0.19 = $9.0 million ÷ ($55 million – $7.0 million) (Based on the trailing twelve months to February 2024).

So, Taylor Devices has an ROCE of 19%. In absolute terms, this is a satisfactory return, but compared to the machinery industry average of 13%, it is much better.

Check out our latest analysis for Taylor appliances

While the past is not representative of the future, it can be helpful to know how a company has performed in the past, which is why the chart above is included below. If you want to learn more about Taylor Devices’ past, check it out free a graph showing Taylor Devices’ past earnings, revenue and cash flow.

So how is Taylor Devices’ ROCE trending?

The trends we’ve seen at Taylor Devices are quite reassuring. The data shows that return on capital has increased significantly over the last five years to 19%. The amount of capital employed also increased by 36%. Increasing returns on increasing amounts of capital are common among multi-bag companies, and that’s why we’re impressed.

Our take on Taylor Devices’ ROCE

A company that increases its return on capital and is able to consistently invest in itself is a very desirable feature and this is what Taylor Devices is characterized by. And the remarkable total return of 358% over the last five years shows us that investors expect more good things to come. In light of this, we think it’s worth taking a closer look at this stock because if Taylor Devices can maintain these trends, it could have a bright future ahead of it.

And finally, we found it 1 warning sign for Taylor Devices that we think you should know about.

While Taylor Devices doesn’t earn the highest return, check it out free a list of companies that achieve high returns on equity and have solid balance sheets.

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This article by Simply Wall St is of a general nature. We comment based on historical data and analyst forecasts, using only an unbiased methodology, and our articles are not intended to provide financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide long-term, focused analysis based on fundamental data. Please note that our analysis may not reflect the latest price-sensitive company announcements or qualitative content. Simply Wall St has no position in any of the stocks mentioned.