Modine Manufacturing (NYSE:MOD) Is Achieving High Returns On Its Capital

What are the early trends we should look for to identify a stock that could multiply in value over the long term? 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. And in light of that, the trends we're seeing at Modine Manufacturing's (NYSE:MOD) look very promising so lets take a look.

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Understanding 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 Modine Manufacturing is:

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

0.21 = US$285m ÷ (US$1.8b - US$484m) (Based on the trailing twelve months to December 2024).

So, Modine Manufacturing has an ROCE of 21%. In absolute terms that's a great return and it's even better than the Auto Components industry average of 11%.

See our latest analysis for Modine Manufacturing

Above you can see how the current ROCE for Modine Manufacturing 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 Modine Manufacturing .

How Are Returns Trending?

We like the trends that we're seeing from Modine Manufacturing. Over the last five years, returns on capital employed have risen substantially to 21%. The amount of capital employed has increased too, by 27%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

In Conclusion...

All in all, it's terrific to see that Modine Manufacturing is reaping the rewards from prior investments and is growing its capital base. And a remarkable 1,652% total return over the last five years tells us that investors are expecting more good things to come in the future. Therefore, we think it would be worth your time to check if these trends are going to continue.

If you'd like to know about the risks facing Modine Manufacturing, we've discovered 3 warning signs that you should be aware of.

High returns are a key ingredient to strong performance, so check out our free list ofstocks 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.