Shareholders Should Look Hard At TAS Tecnologia Avanzata dei Sistemi S.p.A.’s (BIT:TAS) 4.1% Return On Capital – Yahoo Finance

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BIT:TAS) and reflect on its potential as an investment. In particular, we’ll consider its Return On Capital Employed (ROCE), as that can give us insight into how profitably the company is able to employ capital in its business.” data-reactid=”28″>Today we’ll look at TAS Tecnologia Avanzata dei Sistemi S.p.A. (BIT:TAS) and reflect on its potential as an investment. In particular, we’ll consider its Return On Capital Employed (ROCE), as that can give us insight into how profitably the company is able to employ capital in its business.

First, we’ll go over how we calculate ROCE. Second, we’ll look at its ROCE compared to similar companies. Last but not least, we’ll look at what impact its current liabilities have on its ROCE.

Understanding Return On Capital Employed (ROCE)

has suggested that a high ROCE can indicate that ‘one dollar invested in the company generates value of more than one dollar’.” data-reactid=”31″>ROCE measures the ‘return’ (pre-tax profit) a company generates from capital employed in its business. All else being equal, a better business will have a higher ROCE. Ultimately, it is a useful but imperfect metric. Renowned investment researcher Michael Mauboussin has suggested that a high ROCE can indicate that ‘one dollar invested in the company generates value of more than one dollar’.

So, How Do We Calculate ROCE?

Analysts use this formula to calculate return on capital employed:

Or for TAS Tecnologia Avanzata dei Sistemi:

0.041 = €1.8m ÷ (€80m – €35m) (Based on the trailing twelve months to March 2019.)

See our latest analysis for TAS Tecnologia Avanzata dei Sistemi ” data-reactid=”38″> See our latest analysis for TAS Tecnologia Avanzata dei Sistemi

Is TAS Tecnologia Avanzata dei Sistemi’s ROCE Good?

ROCE is commonly used for comparing the performance of similar businesses. We can see TAS Tecnologia Avanzata dei Sistemi’s ROCE is meaningfully below the Software industry average of 8.9%. This could be seen as a negative, as it suggests some competitors may be employing their capital more efficiently. Regardless of how TAS Tecnologia Avanzata dei Sistemi stacks up against its industry, its ROCE in absolute terms is quite low (especially compared to a bank account). It is likely that there are more attractive prospects out there.

TAS Tecnologia Avanzata dei Sistemi delivered an ROCE of 4.1%, which is better than 3 years ago, as was making losses back then. That implies the business has been improving.

BIT:TAS Past Revenue and Net Income, May 31st 2019

graph of past earnings, revenue and cash flow.” data-reactid=”54″>When considering ROCE, bear in mind that it reflects the past and does not necessarily predict the future. ROCE can be deceptive for cyclical businesses, as returns can look incredible in boom times, and terribly low in downturns. ROCE is, after all, simply a snap shot of a single year. You can check if TAS Tecnologia Avanzata dei Sistemi has cyclical profits by looking at this free graph of past earnings, revenue and cash flow.

What Are Current Liabilities, And How Do They Affect TAS Tecnologia Avanzata dei Sistemi’s ROCE?

Current liabilities include invoices, such as supplier payments, short-term debt, or a tax bill, that need to be paid within 12 months. Due to the way the ROCE equation works, having large bills due in the near term can make it look as though a company has less capital employed, and thus a higher ROCE than usual. To counteract this, we check if a company has high current liabilities, relative to its total assets.

TAS Tecnologia Avanzata dei Sistemi has total assets of €80m and current liabilities of €35m. As a result, its current liabilities are equal to approximately 44% of its total assets. With a medium level of current liabilities boosting the ROCE a little, TAS Tecnologia Avanzata dei Sistemi’s low ROCE is unappealing.

The Bottom Line On TAS Tecnologia Avanzata dei Sistemi’s ROCE

list of interesting companies that trade on a P/E below 20 (but have proven they can grow earnings).” data-reactid=”63″>So researching other companies may be a better use of your time. You might be able to find a better investment than TAS Tecnologia Avanzata dei Sistemi. If you want a selection of possible winners, check out this free list of interesting companies that trade on a P/E below 20 (but have proven they can grow earnings).

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We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.” data-reactid=”65″>We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.