Returns At Toromont Industries (TSE:TIH) Appear To Be Weighed Down

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. That's why when we briefly looked at Toromont Industries' (TSE:TIH) ROCE trend, we were pretty happy with what we saw.

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What Is 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 Toromont Industries, this is the formula:

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

0.16 = CA$670m ÷ (CA$5.2b - CA$965m) (Based on the trailing twelve months to September 2025).

Thus, Toromont Industries has an ROCE of 16%. On its own, that's a standard return, however it's much better than the 11% generated by the Trade Distributors industry.

View our latest analysis for Toromont Industries

In the above chart we have measured Toromont Industries' prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Toromont Industries .

So How Is Toromont Industries' ROCE Trending?

While the current returns on capital are decent, they haven't changed much. Over the past five years, ROCE has remained relatively flat at around 16% and the business has deployed 68% more capital into its operations. Since 16% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

In Conclusion...

To sum it up, Toromont Industries has simply been reinvesting capital steadily, at those decent rates of return. And long term investors would be thrilled with the 101% return they've received over the last five years. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

Toromont Industries could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation for TIH on our platform quite valuable.

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.