What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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 MRC Global (NYSE:MRC) and its trend of ROCE, 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. The formula for this calculation on MRC Global is:

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

0.12 = US$150m ÷ (US$1.8b - US$524m) (Based on the trailing twelve months to September 2024).

Thus, MRC Global has an ROCE of 12%. That's a pretty standard return and it's in line with the industry average of 12%.

See our latest analysis for MRC Global

In the above chart we have measured MRC Global's 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 MRC Global .

How Are Returns Trending?

MRC Global has not disappointed in regards to ROCE growth. The figures show that over the last five years, returns on capital have grown by 63%. That's not bad because this tells for every dollar invested (capital employed), the company is increasing the amount earned from that dollar. In regards to capital employed, MRC Global appears to been achieving more with less, since the business is using 37% less capital to run its operation. If this trend continues, the business might be getting more efficient but it's shrinking in terms of total assets.

Our Take On MRC Global's ROCE

In summary, it's great to see that MRC Global has been able to turn things around and earn higher returns on lower amounts of capital. Considering the stock has delivered 3.2% to its stockholders over the last five years, it may be fair to think that investors aren't fully aware of the promising trends yet. So exploring more about this stock could uncover a good opportunity, if the valuation and other metrics stack up.

While MRC Global looks impressive, no company is worth an infinite price. The intrinsic value infographic for MRC helps visualize whether it is currently trading for a fair price.