AT & S Austria Technologie & Systemtechnik (VIE:ATS) Might Have The Makings Of A Multi-Bagger

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So on that note, AT & S Austria Technologie & Systemtechnik (VIE:ATS) looks quite promising in regards to its trends of return on capital.

Return On Capital Employed (ROCE): What is it?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for AT & S Austria Technologie & Systemtechnik:

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

0.043 = €107m ÷ (€3.0b - €519m) (Based on the trailing twelve months to December 2021).

Thus, AT & S Austria Technologie & Systemtechnik has an ROCE of 4.3%. In absolute terms, that's a low return and it also under-performs the Electronic industry average of 12%.

View our latest analysis for AT & S Austria Technologie & Systemtechnik

In the above chart we have measured AT & S Austria Technologie & Systemtechnik'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 report for AT & S Austria Technologie & Systemtechnik.

What The Trend Of ROCE Can Tell Us

While in absolute terms it isn't a high ROCE, it's promising to see that it has been moving in the right direction. The data shows that returns on capital have increased substantially over the last five years to 4.3%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 120%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

The Bottom Line On AT & S Austria Technologie & Systemtechnik's ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what AT & S Austria Technologie & Systemtechnik has. And a remarkable 421% total return over the last five years tells us that investors are expecting more good things to come in the future. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

One more thing: We've identified 2 warning signs with AT & S Austria Technologie & Systemtechnik (at least 1 which is significant) , and understanding them would certainly be useful.

While AT & S Austria Technologie & Systemtechnik may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.