AptarGroup's (NYSE:ATR) Returns Have Hit A Wall

If you're looking for a multi-bagger, there's a few things to keep an eye out for. 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Having said that, from a first glance at AptarGroup (NYSE:ATR) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

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Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on AptarGroup is:

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

0.15 = US$511m ÷ (US$4.5b - US$1.2b) (Based on the trailing twelve months to March 2025).

Thus, AptarGroup has an ROCE of 15%. On its own, that's a standard return, however it's much better than the 10% generated by the Packaging industry.

View our latest analysis for AptarGroup

In the above chart we have measured AptarGroup's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering AptarGroup for free.

What Does the ROCE Trend For AptarGroup Tell Us?

There hasn't been much to report for AptarGroup's returns and its level of capital employed because both metrics have been steady for the past five years. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. So unless we see a substantial change at AptarGroup in terms of ROCE and additional investments being made, we wouldn't hold our breath on it being a multi-bagger. This probably explains why AptarGroup is paying out 31% of its income to shareholders in the form of dividends. Unless businesses have highly compelling growth opportunities, they'll typically return some money to shareholders.

In Conclusion...

In a nutshell, AptarGroup has been trudging along with the same returns from the same amount of capital over the last five years. Since the stock has gained an impressive 59% over the last five years, investors must think there's better things to come. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.

AptarGroup could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation for ATR on our platform quite valuable.

While AptarGroup 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.