There's Been No Shortage Of Growth Recently For Thai Beverage's (SGX:Y92) Returns On Capital

Stock Analysis

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing 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. So when we looked at Thai Beverage (SGX:Y92) and its trend of ROCE, we really liked what we saw.

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on Thai Beverage is:

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

0.10 = ฿39b ÷ (฿479b - ฿95b) (Based on the trailing twelve months to March 2023).

Therefore, Thai Beverage has an ROCE of 10%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Beverage industry average of 11%.

See our latest analysis for Thai Beverage

Above you can see how the current ROCE for Thai Beverage compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Thai Beverage here for free.

Thai Beverage has not disappointed with their ROCE growth. The figures show that over the last five years, ROCE has grown 30% whilst employing roughly the same amount of capital. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

As discussed above, Thai Beverage appears to be getting more proficient at generating returns since capital employed has remained flat but earnings (before interest and tax) are up. And since the stock has fallen 16% over the last five years, there might be an opportunity here. So researching this company further and determining whether or not these trends will continue seems justified.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 2 warning signs for Thai Beverage (of which 1 doesn't sit too well with us!) that you should know about.

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.

Find out whether Thai Beverage is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.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.

Thai Beverage Public Company Limited, together with its subsidiaries, produces and distributes alcoholic and non-alcoholic beverages, and food products worldwide.

Good value with proven track record and pays a dividend.