Returns On Capital At Minerals Technologies (NYSE:MTX) Have Hit The Brakes

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. However, after briefly looking over the numbers, we don't think Minerals Technologies (NYSE:MTX) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

Understanding Return On Capital Employed (ROCE)

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on Minerals Technologies is:

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

0.097 = US$280m ÷ (US$3.3b - US$457m) (Based on the trailing twelve months to December 2023).

Thus, Minerals Technologies has an ROCE of 9.7%. On its own that's a low return on capital but it's in line with the industry's average returns of 9.7%.

See our latest analysis for Minerals Technologies

roce

Above you can see how the current ROCE for Minerals 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 Minerals Technologies .

So How Is Minerals Technologies' ROCE Trending?

There hasn't been much to report for Minerals Technologies' returns and its level of capital employed because both metrics have been steady for the past five years. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. So don't be surprised if Minerals Technologies doesn't end up being a multi-bagger in a few years time.

What We Can Learn From Minerals Technologies' ROCE

In summary, Minerals Technologies isn't compounding its earnings but is generating stable returns on the same amount of capital employed. And with the stock having returned a mere 25% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. So if you're looking for a multi-bagger, the underlying trends indicate you may have better chances elsewhere.

Minerals Technologies does have some risks though, and we've spotted 3 warning signs for Minerals Technologies that you might be interested in.

While Minerals Technologies may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.