Stock Analysis

Atlas Air Worldwide Holdings (NASDAQ:AAWW) Might Have The Makings Of A Multi-Bagger

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If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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 Atlas Air Worldwide Holdings (NASDAQ:AAWW) and its trend of ROCE, we really liked what we saw.

Return On Capital Employed (ROCE): What Is It?

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. Analysts use this formula to calculate it for Atlas Air Worldwide Holdings:

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

0.10 = US$551m ÷ (US$6.7b - US$1.2b) (Based on the trailing twelve months to December 2022).

Thus, Atlas Air Worldwide Holdings has an ROCE of 10.0%. In absolute terms, that's a low return but it's around the Logistics industry average of 12%.

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NasdaqGS:AAWW Return on Capital Employed March 17th 2023

Above you can see how the current ROCE for Atlas Air Worldwide Holdings 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 Can We Tell From Atlas Air Worldwide Holdings' ROCE Trend?

While in absolute terms it isn't a high ROCE, it's promising to see that it has been moving in the right direction. The data shows that returns on capital have increased substantially over the last five years to 10.0%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 31%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

The Key Takeaway

All in all, it's terrific to see that Atlas Air Worldwide Holdings is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a solid 74% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. In light of that, we think it's worth looking further into this stock because if Atlas Air Worldwide Holdings can keep these trends up, it could have a bright future ahead.

Like most companies, Atlas Air Worldwide Holdings does come with some risks, and we've found 2 warning signs that you should be aware of.

While Atlas Air Worldwide Holdings 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.

What are the risks and opportunities for Atlas Air Worldwide Holdings?

Atlas Air Worldwide Holdings, Inc., through its subsidiaries, provides outsourced aircraft and aviation operating services.

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  • Trading at 65.7% below our estimate of its fair value

  • Earnings are forecast to grow 4.98% per year


  • Profit margins (7.8%) are lower than last year (12.2%)

  • Has a high level of debt

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