The Return Trends At AirSculpt Technologies (NASDAQ:AIRS) Look Promising

There are a few key trends to look for if we want to identify the next multi-bagger. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So when we looked at AirSculpt Technologies (NASDAQ:AIRS) and its trend of ROCE, we really liked what we saw.

What Is Return On Capital Employed (ROCE)?

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. The formula for this calculation on AirSculpt Technologies is:

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

0.045 = US$8.4m ÷ (US$210m - US$25m) (Based on the trailing twelve months to June 2024).

So, AirSculpt Technologies has an ROCE of 4.5%. Ultimately, that's a low return and it under-performs the Healthcare industry average of 10%.

View our latest analysis for AirSculpt Technologies

In the above chart we have measured AirSculpt Technologies' 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 AirSculpt Technologies .

So How Is AirSculpt Technologies' ROCE Trending?

While there are companies with higher returns on capital out there, we still find the trend at AirSculpt Technologies promising. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 42% over the last four years. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

In Conclusion...

To sum it up, AirSculpt Technologies is collecting higher returns from the same amount of capital, and that's impressive. And since the stock has fallen 13% over the last year, there might be an opportunity here. With that in mind, we believe the promising trends warrant this stock for further investigation.

If you'd like to know about the risks facing AirSculpt Technologies, we've discovered 1 warning sign that you should be aware of.

While AirSculpt 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.