If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. 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 Applied Industrial Technologies' (NYSE:AIT) returns on capital, so let's have a look.

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 Applied Industrial Technologies, this is the formula:

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

0.20 = US$496m ÷ (US$3.0b - US$501m) (Based on the trailing twelve months to June 2024).

So, Applied Industrial Technologies has an ROCE of 20%. That's a fantastic return and not only that, it outpaces the average of 12% earned by companies in a similar industry.

See our latest analysis for Applied Industrial Technologies

In the above chart we have measured Applied Industrial Technologies' prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Applied Industrial Technologies .

What Does the ROCE Trend For Applied Industrial Technologies Tell Us?

We like the trends that we're seeing from Applied Industrial Technologies. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 20%. 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 28%. So we're very much inspired by what we're seeing at Applied Industrial Technologies thanks to its ability to profitably reinvest capital.

The Bottom Line On Applied Industrial Technologies' ROCE

All in all, it's terrific to see that Applied Industrial Technologies is reaping the rewards from prior investments and is growing its capital base. And a remarkable 298% total return over the last five years tells us that investors are expecting more good things to come in the future. Therefore, we think it would be worth your time to check if these trends are going to continue.