We Like These Underlying Return On Capital Trends At Aktor Societe Anonyme Holding Company Technical and Energy Projects (ATH:INKAT)

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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So when we looked at Aktor Societe Anonyme Holding Company Technical and Energy Projects (ATH:INKAT) and its trend of ROCE, we really liked what we saw.

Understanding 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 Aktor Societe Anonyme Holding Company Technical and Energy Projects:

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

0.11 = €44m ÷ (€1.5b - €1.1b) (Based on the trailing twelve months to June 2024).

So, Aktor Societe Anonyme Holding Company Technical and Energy Projects has an ROCE of 11%. In absolute terms, that's a satisfactory return, but compared to the Construction industry average of 7.3% it's much better.

View our latest analysis for Aktor Societe Anonyme Holding Company Technical and Energy Projects

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Aktor Societe Anonyme Holding Company Technical and Energy Projects.

How Are Returns Trending?

Aktor Societe Anonyme Holding Company Technical and Energy Projects is displaying some positive trends. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 11%. Basically the business is earning more per dollar of capital invested and in addition to that, 246% more capital is being employed now too. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

Another thing to note, Aktor Societe Anonyme Holding Company Technical and Energy Projects has a high ratio of current liabilities to total assets of 74%. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. Ideally we'd like to see this reduce as that would mean fewer obligations bearing risks.

The Bottom Line On Aktor Societe Anonyme Holding Company Technical and Energy Projects' ROCE

In summary, it's great to see that Aktor Societe Anonyme Holding Company Technical and Energy Projects can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. Since the stock has returned a staggering 256% to shareholders over the last five years, it looks like investors are recognizing these changes. 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.

On a final note, we found 2 warning signs for Aktor Societe Anonyme Holding Company Technical and Energy Projects (1 is potentially serious) you should be aware of.

While Aktor Societe Anonyme Holding Company Technical and Energy Projects 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.