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We Like These Underlying Return On Capital Trends At Rayonier Advanced Materials (NYSE:RYAM)

Simply Wall St · 3d ago

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. With that in mind, we've noticed some promising trends at Rayonier Advanced Materials (NYSE:RYAM) so let's look a bit deeper.

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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. Analysts use this formula to calculate it for Rayonier Advanced Materials:

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

0.0094 = US$13m ÷ (US$1.8b - US$376m) (Based on the trailing twelve months to September 2025).

So, Rayonier Advanced Materials has an ROCE of 0.9%. In absolute terms, that's a low return and it also under-performs the Chemicals industry average of 9.3%.

View our latest analysis for Rayonier Advanced Materials

roce
NYSE:RYAM Return on Capital Employed January 6th 2026

In the above chart we have measured Rayonier Advanced Materials' prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Rayonier Advanced Materials .

What Does the ROCE Trend For Rayonier Advanced Materials Tell Us?

Like most people, we're pleased that Rayonier Advanced Materials is now generating some pretax earnings. The company was generating losses five years ago, but now it's turned around, earning 0.9% which is no doubt a relief for some early shareholders. In regards to capital employed, Rayonier Advanced Materials is using 35% less capital than it was five years ago, which on the surface, can indicate that the business has become more efficient at generating these returns. The reduction could indicate that the company is selling some assets, and considering returns are up, they appear to be selling the right ones.

In Conclusion...

In summary, it's great to see that Rayonier Advanced Materials has been able to turn things around and earn higher returns on lower amounts of capital. And since the stock has fallen 11% over the last five years, there might be an opportunity here. With that in mind, we believe the promising trends warrant this stock for further investigation.

On a separate note, we've found 1 warning sign for Rayonier Advanced Materials you'll probably want to know about.

While Rayonier Advanced Materials isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.