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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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So, when we ran our eye over Curtiss-Wright's (NYSE:CW) trend of ROCE, we 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. Analysts use this formula to calculate it for Curtiss-Wright:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.15 = US$573m ÷ (US$4.9b - US$987m) (Based on the trailing twelve months to September 2024).
Thus, Curtiss-Wright has an ROCE of 15%. On its own, that's a standard return, however it's much better than the 9.6% generated by the Aerospace & Defense industry.
See our latest analysis for Curtiss-Wright
Above you can see how the current ROCE for Curtiss-Wright compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Curtiss-Wright .
What Does the ROCE Trend For Curtiss-Wright Tell Us?
While the current returns on capital are decent, they haven't changed much. Over the past five years, ROCE has remained relatively flat at around 15% and the business has deployed 38% more capital into its operations. Since 15% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.
The Bottom Line On Curtiss-Wright's ROCE
In the end, Curtiss-Wright has proven its ability to adequately reinvest capital at good rates of return. And the stock has done incredibly well with a 174% return over the last five years, so long term investors are no doubt ecstatic with that result. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.
While Curtiss-Wright doesn't shine too bright in this respect, it's still worth seeing if the company is trading at attractive prices. You can find that out with our FREE intrinsic value estimation for CW on our platform.