Here's What's Concerning About Allient's (NASDAQ:ALNT) Returns On Capital

What trends should we look for it we want to identify stocks that can multiply in value over the long term? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. However, after briefly looking over the numbers, we don't think Allient (NASDAQ:ALNT) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

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What Is 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 Allient:

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

0.066 = US$34m ÷ (US$588m - US$68m) (Based on the trailing twelve months to June 2025).

So, Allient has an ROCE of 6.6%. In absolute terms, that's a low return and it also under-performs the Electrical industry average of 12%.

View our latest analysis for Allient

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

What Can We Tell From Allient's ROCE Trend?

When we looked at the ROCE trend at Allient, we didn't gain much confidence. To be more specific, ROCE has fallen from 9.1% over the last five years. Meanwhile, the business is utilizing more capital but this hasn't moved the needle much in terms of sales in the past 12 months, so this could reflect longer term investments. It may take some time before the company starts to see any change in earnings from these investments.

The Bottom Line On Allient's ROCE

To conclude, we've found that Allient is reinvesting in the business, but returns have been falling. Although the market must be expecting these trends to improve because the stock has gained 58% over the last five years. But if the trajectory of these underlying trends continue, we think the likelihood of it being a multi-bagger from here isn't high.

Like most companies, Allient does come with some risks, and we've found 1 warning sign that you should be aware of.

While Allient 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.