Why We Like The Returns At Atkore (NYSE:ATKR)

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. So when we looked at the ROCE trend of Atkore (NYSE:ATKR) we really liked what we saw.

What is Return On Capital Employed (ROCE)?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on Atkore is:

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

0.39 = US$618m ÷ (US$2.0b - US$398m) (Based on the trailing twelve months to June 2021).

Thus, Atkore has an ROCE of 39%. That's a fantastic return and not only that, it outpaces the average of 11% earned by companies in a similar industry.

Check out our latest analysis for Atkore

roce

In the above chart we have measured Atkore's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Atkore here for free.

What Can We Tell From Atkore's ROCE Trend?

We like the trends that we're seeing from Atkore. The data shows that returns on capital have increased substantially over the last five years to 39%. Basically the business is earning more per dollar of capital invested and in addition to that, 66% more capital is being employed now too. So we're very much inspired by what we're seeing at Atkore thanks to its ability to profitably reinvest capital.

The Bottom Line On Atkore's ROCE

All in all, it's terrific to see that Atkore is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 374% to shareholders over the last five years, it looks like investors are recognizing these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

If you want to know some of the risks facing Atkore we've found 4 warning signs (1 is potentially serious!) that you should be aware of before investing here.

Atkore 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.

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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