Aspen Aerogels (NYSE:ASPN) Might Have The Makings Of A Multi-Bagger

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Speaking of which, we noticed some great changes in Aspen Aerogels' (NYSE:ASPN) returns on capital, so let's have a look.

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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. The formula for this calculation on Aspen Aerogels is:

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

0.027 = US$12m ÷ (US$491m - US$71m) (Based on the trailing twelve months to September 2025).

Thus, Aspen Aerogels has an ROCE of 2.7%. Ultimately, that's a low return and it under-performs the Chemicals industry average of 9.5%.

See our latest analysis for Aspen Aerogels

In the above chart we have measured Aspen Aerogels' 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 Aspen Aerogels .

So How Is Aspen Aerogels' ROCE Trending?

Aspen Aerogels has recently broken into profitability so their prior investments seem to be paying off. The company was generating losses five years ago, but now it's earning 2.7% which is a sight for sore eyes. In addition to that, Aspen Aerogels is employing 438% more capital than previously which is expected of a company that's trying to break into profitability. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.

The Bottom Line

Overall, Aspen Aerogels gets a big tick from us thanks in most part to the fact that it is now profitable and is reinvesting in its business. And since the stock has dived 77% over the last five years, there may be other factors affecting the company's prospects. Still, it's worth doing some further research to see if the trends will continue into the future.

If you want to continue researching Aspen Aerogels, you might be interested to know about the 1 warning sign that our analysis has discovered.

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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.