Slowing Rates Of Return At AptarGroup (NYSE:ATR) Leave Little Room For Excitement

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount 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. So, when we ran our eye over AptarGroup's (NYSE:ATR) trend of ROCE, we liked what we saw.

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)

0.12 = US$394m ÷ (US$4.3b - US$1.0b) (Based on the trailing twelve months to June 2023).

So, AptarGroup has an ROCE of 12%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Packaging industry average of 11%.

View our latest analysis for AptarGroup

Above you can see how the current ROCE for AptarGroup compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

What Does the ROCE Trend For AptarGroup Tell Us?

The trend of ROCE doesn't stand out much, but returns on a whole are decent. Over the past five years, ROCE has remained relatively flat at around 12% and the business has deployed 26% more capital into its operations. 12% is a pretty standard return, and it provides some comfort knowing that AptarGroup has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

The Bottom Line

To sum it up, AptarGroup has simply been reinvesting capital steadily, at those decent rates of return. However, over the last five years, the stock has only delivered a 21% return to shareholders who held over that period. So to determine if AptarGroup is a multi-bagger going forward, we'd suggest digging deeper into the company's other fundamentals.

On a final note, we've found 2 warning signs for AptarGroup that we think you should be aware of.

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.