Returns On Capital Are Showing Encouraging Signs At Ampco-Pittsburgh (NYSE:AP)

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. 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 Ampco-Pittsburgh (NYSE:AP) and its trend of ROCE, we really liked what we saw.

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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 Ampco-Pittsburgh is:

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

0.034 = US$13m ÷ (US$537m - US$140m) (Based on the trailing twelve months to June 2025).

So, Ampco-Pittsburgh has an ROCE of 3.4%. Ultimately, that's a low return and it under-performs the Metals and Mining industry average of 10%.

See our latest analysis for Ampco-Pittsburgh

Historical performance is a great place to start when researching a stock so above you can see the gauge for Ampco-Pittsburgh's ROCE against it's prior returns. If you're interested in investigating Ampco-Pittsburgh's past further, check out this free graph covering Ampco-Pittsburgh's past earnings, revenue and cash flow.

How Are Returns Trending?

Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. The figures show that over the last five years, ROCE has grown 33% whilst employing roughly the same amount of capital. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

The Key Takeaway

In summary, we're delighted to see that Ampco-Pittsburgh has been able to increase efficiencies and earn higher rates of return on the same amount of capital. Astute investors may have an opportunity here because the stock has declined 48% in the last five years. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

If you'd like to know more about Ampco-Pittsburgh, we've spotted 2 warning signs, and 1 of them is potentially serious.

While Ampco-Pittsburgh 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.