Returns Are Gaining Momentum At Atlas Air Worldwide Holdings (NASDAQ:AAWW)

If you're looking for a multi-bagger, there's a few things to keep an eye out for. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. With that in mind, we've noticed some promising trends at Atlas Air Worldwide Holdings (NASDAQ:AAWW) so let's look a bit deeper.

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 Atlas Air Worldwide Holdings is:

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).

So, Atlas Air Worldwide Holdings has an ROCE of 10.0%. On its own, that's a low figure but it's around the 12% average generated by the Logistics industry.

View our latest analysis for Atlas Air Worldwide Holdings

roce

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'd like, you can check out the forecasts from the analysts covering Atlas Air Worldwide Holdings here for free.

So How Is Atlas Air Worldwide Holdings' ROCE Trending?

Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 10.0%. Basically the business is earning more per dollar of capital invested and in addition to that, 31% more capital is being employed now too. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

What We Can Learn From Atlas Air Worldwide Holdings' ROCE

To sum it up, Atlas Air Worldwide Holdings has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. 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.

On a separate note, we've found 2 warning signs for Atlas Air Worldwide Holdings you'll probably want to know about.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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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.

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