What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base 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 on that note, TaskUs (NASDAQ:TASK) looks quite promising in regards to its trends of return on capital.

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. To calculate this metric for TaskUs, this is the formula:

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

0.14 = US$105m ÷ (US$875m - US$106m) (Based on the trailing twelve months to March 2024).

So, TaskUs has an ROCE of 14%. By itself that's a normal return on capital and it's in line with the industry's average returns of 14%.

See our latest analysis for TaskUs

In the above chart we have measured TaskUs' prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering TaskUs for free.

What The Trend Of ROCE Can Tell Us

TaskUs is displaying some positive trends. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 14%. The amount of capital employed has increased too, by 39%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

What We Can Learn From TaskUs' ROCE

To sum it up, TaskUs has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And since the stock has fallen 59% over the last three years, there might be an opportunity here. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

Before jumping to any conclusions though, we need to know what value we're getting for the current share price. That's where you can check out our FREE intrinsic value estimation for TASK that compares the share price and estimated value.

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.

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