Yahoo Finance Investors Will Want Accsys Technologies' (LON:AXS) Growth In ROCE To Persist
There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So on that note, Accsys Technologies (LON:AXS) looks quite promising in regards to its trends of return on capital.
What Is Return On Capital Employed (ROCE)?
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 Accsys Technologies is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.083 = €15m ÷ (€227m - €42m) (Based on the trailing twelve months to March 2023).
So, Accsys Technologies has an ROCE of 8.3%. Ultimately, that's a low return and it under-performs the Forestry industry average of 13%.
View our latest analysis for Accsys Technologies
In the above chart we have measured Accsys Technologies' 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 report on analyst forecasts for the company.
How Are Returns Trending?
The fact that Accsys Technologies is now generating some pre-tax profits from its prior investments is very encouraging. The company was generating losses five years ago, but now it's earning 8.3% which is a sight for sore eyes. And unsurprisingly, like most companies trying to break into the black, Accsys Technologies is utilizing 62% more capital than it was five years ago. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.
The Key Takeaway
In summary, it's great to see that Accsys Technologies has managed to break into profitability and is continuing to reinvest in its business. Astute investors may have an opportunity here because the stock has declined 30% in the last five years. With that in mind, we believe the promising trends warrant this stock for further investigation.
If you'd like to know about the risks facing Accsys Technologies, we've discovered 2 warning signs that you should be aware of.
If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.
