Shareholders Would Enjoy A Repeat Of Optex Systems Holdings' (NASDAQ:OPXS) Recent Growth In Returns

What trends should we look for it we want to identify stocks that can multiply in value over the long term? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. 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 the ROCE trend of Optex Systems Holdings (NASDAQ:OPXS) we really liked what we saw.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

What Is Return On Capital Employed (ROCE)?

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 Optex Systems Holdings is:

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

0.26 = US$6.1m ÷ (US$27m - US$4.4m) (Based on the trailing twelve months to March 2025).

Thus, Optex Systems Holdings has an ROCE of 26%. That's a fantastic return and not only that, it outpaces the average of 10% earned by companies in a similar industry.

Check out our latest analysis for Optex Systems Holdings

Historical performance is a great place to start when researching a stock so above you can see the gauge for Optex Systems Holdings' ROCE against it's prior returns. If you'd like to look at how Optex Systems Holdings has performed in the past in other metrics, you can view this free graph of Optex Systems Holdings' past earnings, revenue and cash flow.

What The Trend Of ROCE Can Tell Us

The trends we've noticed at Optex Systems Holdings are quite reassuring. The data shows that returns on capital have increased substantially over the last five years to 26%. The amount of capital employed has increased too, by 39%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

What We Can Learn From Optex Systems Holdings' ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Optex Systems Holdings has. And a remarkable 576% total return over the last five years tells us that investors are expecting more good things to come in the future. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

On a separate note, we've found 3 warning signs for Optex Systems Holdings you'll probably want to know about.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.