Finding a company that has the potential to grow significantly is not easy, but it is possible if we look at some key financial metrics. Usually, we want to see a trend towards growth. return on the capital employed (ROCE) and in parallel a growing base of the capital employed. Ultimately, this shows that this is a company that reinvests profits with increasing returns. Against this background, the ROCE of ATON Green Storage (BIT:ATON) looks great, so let’s see what the trend tells us.
What is return on capital employed (ROCE)?
If you have never worked with ROCE, it measures the “return” (profit before tax) that a company generates on the capital employed in its business. The formula for this calculation at ATON Green Storage is:
Return on capital = earnings before interest and taxes (EBIT) ÷ (total assets – current liabilities)
0.22 = €7.8 million ÷ (€50 million – €14 million) (Based on the last twelve months to June 2023).
Therefore, ATON Green Storage has a ROCE of 22%. In absolute terms, this is a great return and is even higher than the electrical industry average of 13%.
Check out our latest analysis for ATON Green Storage
Above you can see how the current ROCE for ATON Green Storage compares to previous returns on capital, but there is only so much to infer from the past. If you want, you can see the analysts’ forecasts for ATON Green Storage for free.
The trend of ROCE
ATON Green Storage has recently turned profitable, so the investments to date appear to be paying off. Five years ago, the company was losing money, but now it is making 22%, which is a sight to behold. In addition, the company is utilizing 563% more capital than before, which is to be expected from a company that wants to turn profitable. We like this trend because it tells us that the company has lucrative reinvestment opportunities available to it, and if this trend continues, it can lead to highly successful performance.
Our assessment of ATON Green Storage’s ROCE
To the delight of most shareholders, ATON Green Storage is now profitable. Considering that the stock has returned 0.2% to shareholders over the past three years, it is probably safe to assume that investors are not yet fully aware of the promising trends. So, looking closer at this stock could present a good opportunity if the valuation and other metrics are right.
ATON Green Storage carries some risks, as we have found 4 warning signs (and two we don’t like so much) that we think you should know about.
High returns are a key factor for strong performance, so check out our free List of stocks with high return on equity and solid balance sheets.
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This Simply Wall St article is of a general nature. We comment solely on the basis of historical data and analyst forecasts, using an unbiased methodology. Our articles do not constitute financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Simply Wall St does not hold any of the stocks mentioned.
