The Return Trends At Montana Aerospace (VTX:AERO) Look Promising

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding 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. With that in mind, we've noticed some promising trends at Montana Aerospace (VTX:AERO) so let's look a bit deeper.

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Return On Capital Employed (ROCE): What Is It?

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 Montana Aerospace is:

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

0.078 = €109m ÷ (€1.8b - €396m) (Based on the trailing twelve months to June 2025).

Therefore, Montana Aerospace has an ROCE of 7.8%. Ultimately, that's a low return and it under-performs the Aerospace & Defense industry average of 13%.

Check out our latest analysis for Montana Aerospace

Above you can see how the current ROCE for Montana Aerospace compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Montana Aerospace for free.

So How Is Montana Aerospace's ROCE Trending?

The fact that Montana Aerospace 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 7.8% which is a sight for sore eyes. Not only that, but the company is utilizing 57% 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.

In Conclusion...

In summary, it's great to see that Montana Aerospace has managed to break into profitability and is continuing to reinvest in its business. Since the stock has returned a staggering 161% to shareholders over the last three years, it looks like investors are recognizing these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

Montana Aerospace does have some risks though, and we've spotted 2 warning signs for Montana Aerospace that you might be interested in.

While Montana Aerospace 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.