Yahoo Finance TTEC Holdings (NASDAQ:TTEC) Might Be Having Difficulty Using Its Capital Effectively
If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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. However, after investigating TTEC Holdings (NASDAQ:TTEC), we don't think it's current trends fit the mold of a multi-bagger.
Understanding Return On Capital Employed (ROCE)
If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on TTEC Holdings is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.078 = US$139m ÷ (US$2.2b - US$403m) (Based on the trailing twelve months to December 2023).
So, TTEC Holdings has an ROCE of 7.8%. In absolute terms, that's a low return and it also under-performs the Professional Services industry average of 13%.
View our latest analysis for TTEC Holdings
In the above chart we have measured TTEC Holdings' prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for TTEC Holdings .
What Does the ROCE Trend For TTEC Holdings Tell Us?
When we looked at the ROCE trend at TTEC Holdings, we didn't gain much confidence. To be more specific, ROCE has fallen from 12% over the last five years. On the other hand, the company has been employing more capital without a corresponding improvement in sales in the last year, which could suggest these investments are longer term plays. It's worth keeping an eye on the company's earnings from here on to see if these investments do end up contributing to the bottom line.
The Bottom Line On TTEC Holdings' ROCE
In summary, TTEC Holdings is reinvesting funds back into the business for growth but unfortunately it looks like sales haven't increased much just yet. And investors appear hesitant that the trends will pick up because the stock has fallen 70% in the last five years. Therefore based on the analysis done in this article, we don't think TTEC Holdings has the makings of a multi-bagger.
TTEC Holdings does come with some risks though, we found 5 warning signs in our investment analysis, and 1 of those makes us a bit uncomfortable...
While TTEC Holdings may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.
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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.
