Returns On Capital Are Showing Encouraging Signs At Atlas Air Worldwide Holdings (NASDAQ:AAWW)

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding 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 Atlas Air Worldwide Holdings' (NASDAQ:AAWW) returns on capital, so let's have a look.

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)

0.12 = US$578m ÷ (US$6.1b - US$1.3b) (Based on the trailing twelve months to June 2021).

So, Atlas Air Worldwide Holdings has an ROCE of 12%. By itself that's a normal return on capital and it's in line with the industry's average returns of 12%.

Check out our latest analysis for Atlas Air Worldwide Holdings

In the above chart we have measured Atlas Air Worldwide Holdings' 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 report for Atlas Air Worldwide Holdings.

What The Trend Of ROCE Can Tell Us

Investors would be pleased with what's happening at Atlas Air Worldwide Holdings. The data shows that returns on capital have increased substantially over the last five years to 12%. The amount of capital employed has increased too, by 32%. So we're very much inspired by what we're seeing at Atlas Air Worldwide Holdings thanks to its ability to profitably reinvest capital.

The Bottom Line On Atlas Air Worldwide Holdings' ROCE

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. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 96% return over the last five years. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

Atlas Air Worldwide Holdings does come with some risks though, we found 4 warning signs in our investment analysis, and 1 of those is potentially serious...

While Atlas Air Worldwide Holdings isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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.

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