Returns At Spirax Group (LON:SPX) Appear To Be Weighed Down

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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. With that in mind, the ROCE of Spirax Group (LON:SPX) looks decent, right now, so lets see what the trend of returns can tell us.

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Return On Capital Employed (ROCE): What Is It?

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 Spirax Group:

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

0.15 = UK£296m ÷ (UK£2.6b - UK£550m) (Based on the trailing twelve months to June 2025).

So, Spirax Group has an ROCE of 15%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Machinery industry average of 14%.

View our latest analysis for Spirax Group

In the above chart we have measured Spirax Group's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Spirax Group for free.

The Trend Of ROCE

While the returns on capital are good, they haven't moved much. The company has employed 32% more capital in the last five years, and the returns on that capital have remained stable at 15%. 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.

What We Can Learn From Spirax Group's ROCE

In the end, Spirax Group has proven its ability to adequately reinvest capital at good rates of return. Yet over the last five years the stock has declined 33%, so the decline might provide an opening. For that reason, savvy investors might want to look further into this company in case it's a prime investment.

Spirax Group does have some risks though, and we've spotted 1 warning sign for Spirax Group that you might be interested in.

While Spirax Group 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.