Investors Shouldn't Overlook Atlas Energy Solutions' (NYSE:AESI) Impressive Returns On Capital

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? 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. With that in mind, the ROCE of Atlas Energy Solutions (NYSE:AESI) looks great, so lets see what the trend can tell us.

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. To calculate this metric for Atlas Energy Solutions, this is the formula:

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

0.23 = US$270m ÷ (US$1.3b - US$93m) (Based on the trailing twelve months to December 2023).

Therefore, Atlas Energy Solutions has an ROCE of 23%. That's a fantastic return and not only that, it outpaces the average of 12% earned by companies in a similar industry.

See our latest analysis for Atlas Energy Solutions

In the above chart we have measured Atlas Energy Solutions' prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Atlas Energy Solutions .

What Can We Tell From Atlas Energy Solutions' ROCE Trend?

We like the trends that we're seeing from Atlas Energy Solutions. Over the last three years, returns on capital employed have risen substantially to 23%. The amount of capital employed has increased too, by 146%. So we're very much inspired by what we're seeing at Atlas Energy Solutions thanks to its ability to profitably reinvest capital.

What We Can Learn From Atlas Energy Solutions' ROCE

All in all, it's terrific to see that Atlas Energy Solutions 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 38% return over the last year. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 5 warning signs for Atlas Energy Solutions (of which 1 can't be ignored!) that you should know about.

Atlas Energy Solutions is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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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.