The Australian midfielder spent eight years with the Toffees before joining New York Red Bulls of North America's Major League Soccer in 2012.
During Cahill's time at Goodison Park, Everton were a team that would finish consistently in the top half of the table without really challenging for any silverware.
The former Millwall star believes bringing in some top quality players would help Everton push towards the top four of England's premiership but he has urged caution as losing the identity of the club would be of more consequence than slipping up or down the standings.
"Do you spend an astronomical amount of money and try and win the league and potentially burn the candle at both ends or do you become this consistent team that's a force to be reckoned with?," Cahill posed to ESPN's Men in Blazers podcast this week.
"I think the way that it's built up and the basis of where it's at now, it's at the point where maybe it needs three players that could make it a title-contending team.
"Right now, we (Everton) are in the top six and it's probably a reflection of the team that we have. Also, a lot of credit to Roberto Martinez for the style of football and the way they've gone about it.
"We are probably one of the hardest teams to beat in the league."
Cahill, who is Australia's all-time leading goalscorer, netted over 60 goals in more than 270 appearances for Everton and is extremely proud of what he achieved during his time on the blue side of the River Mersey.
He would love to see his old boys continue their climb up the league table but as long as it doesn't come at the cost of the humble character of the 'People's Club'.
"Overall, I'm proud of everything in the eight years and I'm proud of everything that's happening now and the best thing is, is sometimes you have to be careful what you wish for because I know for a fact that Bill Kenwright loves the club and he's passionate about it," he added.
"He's heart is in the right place but when you get that big owner that just wants to buy success then you lose the authenticity of your brand.
"You lose the feeling of what it becomes and what it means to be an Evertonian. It's a double-edged sword but also I'm proud of now and the way things are and I'm happy (but) it might need that two or three players to take us to a title or to the top four."