Curtiss-Wright (NYSE:CW) Hasn't Managed To Accelerate Its Returns

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. 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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. That's why when we briefly looked at Curtiss-Wright's (NYSE:CW) ROCE trend, we were pretty happy with what we saw.

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

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Curtiss-Wright is:

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

0.15 = US$575m ÷ (US$5.0b - US$1.1b) (Based on the trailing twelve months to December 2024).

So, Curtiss-Wright has an ROCE of 15%. On its own, that's a standard return, however it's much better than the 9.9% generated by the Aerospace & Defense industry.

View our latest analysis for Curtiss-Wright

In the above chart we have measured Curtiss-Wright'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 Curtiss-Wright for free.

What The Trend Of ROCE Can Tell Us

While the returns on capital are good, they haven't moved much. The company has consistently earned 15% for the last five years, and the capital employed within the business has risen 29% in that time. 15% is a pretty standard return, and it provides some comfort knowing that Curtiss-Wright has consistently earned this amount. 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.

The Key Takeaway

In the end, Curtiss-Wright has proven its ability to adequately reinvest capital at good rates of return. And long term investors would be thrilled with the 244% return they've received over the last five years. So even though the stock might be more "expensive" than it was before, we think the strong fundamentals warrant this stock for further research.

Like most companies, Curtiss-Wright does come with some risks, and we've found 1 warning sign that you should be aware of.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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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.