Investors Will Want Applied Industrial Technologies' (NYSE:AIT) Growth In ROCE To Persist

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So on that note, Applied Industrial Technologies (NYSE:AIT) looks quite promising in regards to its trends of return on capital.

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

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. To calculate this metric for Applied Industrial Technologies, this is the formula:

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

0.19 = US$504m ÷ (US$3.1b - US$474m) (Based on the trailing twelve months to March 2025).

Therefore, Applied Industrial Technologies has an ROCE of 19%. In absolute terms, that's a satisfactory return, but compared to the Trade Distributors industry average of 11% it's much better.

Check out our latest analysis for Applied Industrial Technologies

Above you can see how the current ROCE for Applied Industrial Technologies compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Applied Industrial Technologies .

The Trend Of ROCE

The trends we've noticed at Applied Industrial Technologies are quite reassuring. The data shows that returns on capital have increased substantially over the last five years to 19%. Basically the business is earning more per dollar of capital invested and in addition to that, 43% more capital is being employed now too. So we're very much inspired by what we're seeing at Applied Industrial Technologies thanks to its ability to profitably reinvest capital.

What We Can Learn From Applied Industrial Technologies' 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 Applied Industrial Technologies has. And a remarkable 322% total return over the last five years tells us that investors are expecting more good things to come in the future. Therefore, we think it would be worth your time to check if these trends are going to continue.

On the other side of ROCE, we have to consider valuation. That's why we have a FREE intrinsic value estimation for AIT on our platform that is definitely worth checking out.

While Applied Industrial Technologies 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.