Returns On Capital Are Showing Encouraging Signs At TAL Education Group (NYSE:TAL)

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at TAL Education Group (NYSE:TAL) and its trend of ROCE, we really liked what we saw.

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What Is Return On Capital Employed (ROCE)?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for TAL Education Group:

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

0.02 = US$77m ÷ (US$5.5b - US$1.7b) (Based on the trailing twelve months to August 2025).

Therefore, TAL Education Group has an ROCE of 2.0%. In absolute terms, that's a low return and it also under-performs the Consumer Services industry average of 13%.

See our latest analysis for TAL Education Group

In the above chart we have measured TAL Education Group's 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 TAL Education Group .

What Can We Tell From TAL Education Group's ROCE Trend?

While there are companies with higher returns on capital out there, we still find the trend at TAL Education Group promising. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 91% in that same time. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

The Bottom Line On TAL Education Group's ROCE

In summary, we're delighted to see that TAL Education Group has been able to increase efficiencies and earn higher rates of return on the same amount of capital. However the stock is down a substantial 85% in the last five years so there could be other areas of the business hurting its prospects. In any case, we believe the economic trends of this company are positive and looking into the stock further could prove rewarding.

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 TAL 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.