Canada markets closed
  • S&P/TSX

    19,973.22
    -16.95 (-0.08%)
     
  • S&P 500

    3,933.92
    -7.34 (-0.19%)
     
  • DOW

    33,597.92
    +1.58 (+0.00%)
     
  • CAD/USD

    0.7310
    -0.0016 (-0.22%)
     
  • CRUDE OIL

    72.59
    +0.58 (+0.81%)
     
  • BTC-CAD

    23,023.09
    -439.88 (-1.87%)
     
  • CMC Crypto 200

    394.57
    -7.47 (-1.86%)
     
  • GOLD FUTURES

    1,795.10
    -2.90 (-0.16%)
     
  • RUSSELL 2000

    1,806.90
    -5.67 (-0.31%)
     
  • 10-Yr Bond

    3.4080
    -0.1050 (-2.99%)
     
  • NASDAQ futures

    11,460.00
    -49.50 (-0.43%)
     
  • VOLATILITY

    22.68
    +0.51 (+2.30%)
     
  • FTSE

    7,489.19
    -32.20 (-0.43%)
     
  • NIKKEI 225

    27,446.43
    -239.97 (-0.87%)
     
  • CAD/EUR

    0.6956
    -0.0012 (-0.17%)
     

Returns Are Gaining Momentum At Chart Industries (NYSE:GTLS)

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at Chart Industries (NYSE:GTLS) 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. The formula for this calculation on Chart Industries is:

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

0.039 = US$93m ÷ (US$3.2b - US$775m) (Based on the trailing twelve months to June 2022).

So, Chart Industries has an ROCE of 3.9%. Ultimately, that's a low return and it under-performs the Machinery industry average of 9.5%.

Check out our latest analysis for Chart Industries

roce
roce

In the above chart we have measured Chart Industries' prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

How Are Returns Trending?

We're glad to see that ROCE is heading in the right direction, even if it is still low at the moment. The data shows that returns on capital have increased substantially over the last five years to 3.9%. The amount of capital employed has increased too, by 139%. 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 Chart Industries is reaping the rewards from prior investments and is growing its capital base. And a remarkable 498% total return over the last five years tells us that investors are expecting more good things to come in the future. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

Chart Industries does come with some risks though, we found 2 warning signs in our investment analysis, and 1 of those doesn't sit too well with us...

While Chart Industries 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.

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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here