Albany International (NYSE:AIN) Shareholders Will Want The ROCE Trajectory To Continue

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at Albany International (NYSE:AIN) and its trend of ROCE, we really liked what we saw.

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. Analysts use this formula to calculate it for Albany International:

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

0.12 = US$177m ÷ (US$1.6b - US$188m) (Based on the trailing twelve months to June 2022).

Thus, Albany International has an ROCE of 12%. In absolute terms, that's a satisfactory return, but compared to the Machinery industry average of 10% it's much better.

View our latest analysis for Albany International

Above you can see how the current ROCE for Albany International 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 report for Albany International.

What The Trend Of ROCE Can Tell Us

Investors would be pleased with what's happening at Albany International. Over the last five years, returns on capital employed have risen substantially to 12%. The amount of capital employed has increased too, by 29%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

The Bottom Line On Albany International's ROCE

All in all, it's terrific to see that Albany International is reaping the rewards from prior investments and is growing its capital base. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 87% return over the last five years. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

While Albany International looks impressive, no company is worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether AIN is currently trading for a fair price.

While Albany International may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.