FTAI Aviation (NASDAQ:FTAI) Might Have The Makings Of A Multi-Bagger

There are a few key trends to look for if we want to identify the next multi-bagger. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So on that note, FTAI Aviation (NASDAQ:FTAI) looks quite promising in regards to its trends of return on capital.

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

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on FTAI Aviation is:

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

0.058 = US$198m ÷ (US$3.7b - US$315m) (Based on the trailing twelve months to September 2024).

Thus, FTAI Aviation has an ROCE of 5.8%. In absolute terms, that's a low return and it also under-performs the Trade Distributors industry average of 12%.

View our latest analysis for FTAI Aviation

In the above chart we have measured FTAI Aviation's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for FTAI Aviation .

What The Trend Of ROCE Can Tell Us

We're glad to see that ROCE is heading in the right direction, even if it is still low at the moment. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 5.8%. The amount of capital employed has increased too, by 33%. So we're very much inspired by what we're seeing at FTAI Aviation thanks to its ability to profitably reinvest capital.

Our Take On FTAI Aviation's ROCE

In summary, it's great to see that FTAI Aviation 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. And a remarkable 1,239% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if FTAI Aviation can keep these trends up, it could have a bright future ahead.

If you want to continue researching FTAI Aviation, you might be interested to know about the 1 warning sign that our analysis has discovered.

While FTAI Aviation 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.