We Think ATON Green Storage (BIT:ATON) Might Have The DNA Of A Multi-Bagger

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, the ROCE of ATON Green Storage (BIT:ATON) looks great, so lets see what the trend can tell us.

What Is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on ATON Green Storage is:

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

0.22 = €7.8m ÷ (€50m - €14m) (Based on the trailing twelve months to June 2023).

Thus, ATON Green Storage has an ROCE of 22%. In absolute terms that's a great return and it's even better than the Electrical industry average of 13%.

Check out our latest analysis for ATON Green Storage

Above you can see how the current ROCE for ATON Green Storage 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 ATON Green Storage for free.

The Trend Of ROCE

ATON Green Storage 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 22% which is a sight for sore eyes. Not only that, but the company is utilizing 563% more capital than before, but that's to be expected from a company trying to break into profitability. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.

Our Take On ATON Green Storage's ROCE

To the delight of most shareholders, ATON Green Storage has now broken into profitability. Considering the stock has delivered 0.2% to its stockholders over the last three years, it may be fair to think that investors aren't fully aware of the promising trends yet. So exploring more about this stock could uncover a good opportunity, if the valuation and other metrics stack up.

ATON Green Storage does have some risks, we noticed 4 warning signs (and 2 which don't sit too well with us) we think you should know about.

High returns are a key ingredient to strong performance, so check out our free list ofstocks 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.