Will the Promising Trends At Accsys Technologies (LON:AXS) Continue?

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. 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, Accsys Technologies (LON:AXS) looks quite promising in regards to its trends of return on capital.

What is Return On Capital Employed (ROCE)?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the 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)

0.025 = €4.6m ÷ (€207m - €24m) (Based on the trailing twelve months to March 2020).

So, Accsys Technologies has an ROCE of 2.5%. In absolute terms, that's a low return and it also under-performs the Forestry industry average of 6.4%.

View our latest analysis for Accsys Technologies

Above you can the how the current ROCE for Accsys Technologies' compares to it's prior returns on capital, but you can only tell so much from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Accsys Technologies.

What Can We Tell From Accsys Technologies' ROCE Trend?

We're delighted to see that Accsys Technologies is reaping rewards from its investments and is now generating some pre-tax profits. Shareholders would no doubt be pleased with this because the business was loss-making five years ago but is is now generating 2.5% on its capital. And unsurprisingly, like most companies trying to break into the black, Accsys Technologies is utilizing 327% 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 Bottom Line

In summary, it's great to see that Accsys Technologies has managed to break into profitability and is continuing to reinvest in its business. Investors may not be impressed by the favorable underlying trends yet because over the last five years the stock has only returned 27% to shareholders. Given that, we'd look further into this stock in case it has more traits that could make it multiply in the long term.

Accsys Technologies does have some risks, we noticed 2 warning signs (and 1 which can't be ignored) we think you should know about.

While Accsys Technologies 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.

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