Investors Met With Slowing Returns on Capital At Curtiss-Wright (NYSE:CW)

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding 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. 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.

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

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. Analysts use this formula to calculate it for Curtiss-Wright:

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

0.13 = US$478m ÷ (US$4.4b - US$721m) (Based on the trailing twelve months to June 2023).

So, Curtiss-Wright has an ROCE of 13%. On its own, that's a standard return, however it's much better than the 9.4% generated by the Aerospace & Defense industry.

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 to see what analysts are forecasting going forward, you should check out our free report for Curtiss-Wright.

What Does the ROCE Trend For Curtiss-Wright Tell Us?

While the returns on capital are good, they haven't moved much. The company has employed 41% more capital in the last five years, and the returns on that capital have remained stable at 13%. 13% 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.

The Key Takeaway

In the end, Curtiss-Wright has proven its ability to adequately reinvest capital at good rates of return. And the stock has followed suit returning a meaningful 52% to shareholders 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.

If you'd like to know about the risks facing Curtiss-Wright, we've discovered 2 warning signs that you should be aware of.

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.