Investors Should Be Encouraged By ADvTECH's (JSE:ADH) Returns On Capital

If you're looking for a multi-bagger, there's a few things to 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. And in light of that, the trends we're seeing at ADvTECH's (JSE:ADH) look very promising so lets take a look.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

What Is 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 ADvTECH is:

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

0.24 = R1.9b ÷ (R11b - R3.3b) (Based on the trailing twelve months to June 2025).

Therefore, ADvTECH has an ROCE of 24%. That's a fantastic return and not only that, it outpaces the average of 19% earned by companies in a similar industry.

See our latest analysis for ADvTECH

Above you can see how the current ROCE for ADvTECH 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 analyst report for ADvTECH .

What The Trend Of ROCE Can Tell Us

The trends we've noticed at ADvTECH are quite reassuring. Over the last five years, returns on capital employed have risen substantially to 24%. Basically the business is earning more per dollar of capital invested and in addition to that, 27% more capital is being employed now too. So we're very much inspired by what we're seeing at ADvTECH thanks to its ability to profitably reinvest capital.

The Bottom Line On ADvTECH's ROCE

All in all, it's terrific to see that ADvTECH is reaping the rewards from prior investments and is growing its capital base. And a remarkable 344% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if ADvTECH can keep these trends up, it could have a bright future ahead.

One more thing to note, we've identified 1 warning sign with ADvTECH and understanding this should be part of your investment process.

ADvTECH is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.