Yahoo Finance Slowing Rates Of Return At Curtiss-Wright (NYSE:CW) Leave Little Room For Excitement
If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. 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. With that in mind, the ROCE of Curtiss-Wright (NYSE:CW) looks decent, right now, so lets see what the trend of returns can tell us.
What Is 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. To calculate this metric for Curtiss-Wright, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.14 = US$535m ÷ (US$4.6b - US$858m) (Based on the trailing twelve months to March 2024).
So, Curtiss-Wright has an ROCE of 14%. In absolute terms, that's a satisfactory return, but compared to the Aerospace & Defense industry average of 9.8% it's much better.
View 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, you can check out the forecasts from the analysts covering Curtiss-Wright for free.
What Can We Tell From Curtiss-Wright's ROCE Trend?
The trend of ROCE doesn't stand out much, but returns on a whole are decent. The company has employed 38% more capital in the last five years, and the returns on that capital have remained stable at 14%. 14% is a pretty standard return, and it provides some comfort knowing that Curtiss-Wright has consistently earned this amount. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.
What We Can Learn From Curtiss-Wright's ROCE
To sum it up, Curtiss-Wright has simply been reinvesting capital steadily, at those decent rates of return. And long term investors would be thrilled with the 128% return they've received over the last five years. So while the positive underlying trends may be accounted for by investors, we still think this stock is worth looking into further.
On a separate note, we've found 1 warning sign for Curtiss-Wright you'll probably want to know about.
While Curtiss-Wright isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.
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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.
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