Under The Bonnet, Axcelis Technologies' (NASDAQ:ACLS) Returns Look Impressive
What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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. Speaking of which, we noticed some great changes in Axcelis Technologies' (NASDAQ:ACLS) returns on capital, so let's have a look.
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 Axcelis Technologies:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.28 = US$212m ÷ (US$1.0b - US$248m) (Based on the trailing twelve months to December 2022).
So, Axcelis Technologies has an ROCE of 28%. In absolute terms that's a great return and it's even better than the Semiconductor industry average of 14%.
View our latest analysis for Axcelis Technologies
Above you can see how the current ROCE for Axcelis Technologies compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.
How Are Returns Trending?
Investors would be pleased with what's happening at Axcelis Technologies. The data shows that returns on capital have increased substantially over the last five years to 28%. 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 87%. So we're very much inspired by what we're seeing at Axcelis Technologies thanks to its ability to profitably reinvest capital.
The Bottom Line
All in all, it's terrific to see that Axcelis Technologies is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 478% to shareholders over the last five years, it looks like investors are recognizing these changes. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.
On a final note, we've found 1 warning sign for Axcelis Technologies that we think you should be aware of.
If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning 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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