Yahoo Finance There's Been No Shortage Of Growth Recently For Accsys Technologies' (LON:AXS) Returns On Capital
If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? 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. With that in mind, we've noticed some promising trends at Accsys Technologies (LON:AXS) so let's look a bit deeper.
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. Analysts use this formula to calculate it for Accsys Technologies:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.021 = €4.5m ÷ (€255m - €42m) (Based on the trailing twelve months to September 2021).
So, Accsys Technologies has an ROCE of 2.1%. Ultimately, that's a low return and it under-performs the Forestry industry average of 10.0%.
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'd like, you can check out the forecasts from the analysts covering Accsys Technologies here for free.
What The Trend Of ROCE Can Tell Us
Accsys Technologies has recently broken into profitability so their prior investments seem to be paying off. The company was generating losses five years ago, but now it's earning 2.1% which is a sight for sore eyes. Not only that, but the company is utilizing 412% more capital than before, but that's to be expected from a company trying to break into profitability. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, both common traits of a multi-bagger.
The Bottom Line On Accsys Technologies' ROCE
In summary, it's great to see that Accsys Technologies has managed to break into profitability and is continuing to reinvest in its business. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. In light of that, we think it's worth looking further into this stock because if Accsys Technologies can keep these trends up, it could have a bright future ahead.
Accsys Technologies does have some risks though, and we've spotted 2 warning signs for Accsys Technologies that you might be interested in.
While Accsys Technologies isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.
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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.
