If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So when we looked at the ROCE trend of Axcelis Technologies (NASDAQ:ACLS) 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. To calculate this metric for Axcelis Technologies, this is the formula:

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

0.25 = US$260m ÷ (US$1.3b - US$244m) (Based on the trailing twelve months to June 2024).

Thus, Axcelis Technologies has an ROCE of 25%. That's a fantastic return and not only that, it outpaces the average of 9.0% earned by companies in a similar industry.

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 analyst report for Axcelis Technologies .

So How Is Axcelis Technologies' ROCE Trending?

We like the trends that we're seeing from Axcelis Technologies. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 25%. The amount of capital employed has increased too, by 125%. So we're very much inspired by what we're seeing at Axcelis Technologies thanks to its ability to profitably reinvest capital.

What We Can Learn From Axcelis Technologies' ROCE

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 429% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if Axcelis Technologies can keep these trends up, it could have a bright future ahead.

Axcelis Technologies does have some risks, we noticed 2 warning signs (and 1 which is a bit unpleasant) we think you should know about.

Axcelis Technologies 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.

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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.