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Atlas Air Worldwide Holdings (NASDAQ:AAWW) Shareholders Will Want The ROCE Trajectory To Continue

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Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing 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 Atlas Air Worldwide Holdings (NASDAQ:AAWW) and its trend of ROCE, we really liked what we saw.

Return On Capital Employed (ROCE): What is it?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Atlas Air Worldwide Holdings:

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

0.14 = US$712m ÷ (US$6.4b - US$1.4b) (Based on the trailing twelve months to December 2021).

Thus, Atlas Air Worldwide Holdings has an ROCE of 14%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Logistics industry average of 13%.

View our latest analysis for Atlas Air Worldwide Holdings

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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?

The trends we've noticed at Atlas Air Worldwide Holdings are quite reassuring. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 14%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 36%. So we're very much inspired by what we're seeing at Atlas Air Worldwide Holdings thanks to its ability to profitably reinvest capital.

The Bottom Line On Atlas Air Worldwide Holdings' ROCE

All in all, it's terrific to see that Atlas Air Worldwide Holdings is reaping the rewards from prior investments and is growing its capital base. Since the stock has only returned 18% to shareholders over the last five years, the promising fundamentals may not be recognized yet by investors. So exploring more about this stock could uncover a good opportunity, if the valuation and other metrics stack up.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 3 warning signs for Atlas Air Worldwide Holdings (of which 1 shouldn't be ignored!) that you should know about.

While Atlas Air Worldwide Holdings isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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.