Stock Analysis

Returns On Capital At Curtiss-Wright (NYSE:CW) Have Stalled

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To find a multi-bagger stock, what are the underlying trends we should look for in a business? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount 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 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$441m ÷ (US$4.4b - US$971m) (Based on the trailing twelve months to December 2022).

So, Curtiss-Wright has an ROCE of 13%. In absolute terms, that's a satisfactory return, but compared to the Aerospace & Defense industry average of 9.4% it's much better.

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NYSE:CW Return on Capital Employed March 14th 2023

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're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

What The Trend Of ROCE Can Tell Us

While the returns on capital are good, they haven't moved much. Over the past five years, ROCE has remained relatively flat at around 13% and the business has deployed 31% more capital into its operations. 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 Bottom Line On Curtiss-Wright's ROCE

In the end, Curtiss-Wright has proven its ability to adequately reinvest capital at good rates of return. And given the stock has only risen 25% over the last five years, we'd suspect the market is beginning to recognize these trends. So to determine if Curtiss-Wright is a multi-bagger going forward, we'd suggest digging deeper into the company's other fundamentals.

Curtiss-Wright does have some risks though, and we've spotted 2 warning signs for Curtiss-Wright that you might be interested in.

While Curtiss-Wright may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

What are the risks and opportunities for Curtiss-Wright?

Curtiss-Wright Corporation, together with its subsidiaries, provides engineered products, solutions, and services to the aerospace, defense, general industrial, and power generation markets worldwide.

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  • Trading at 16.6% below our estimate of its fair value

  • Earnings are forecast to grow 7.14% per year

  • Earnings grew by 10.2% over the past year


  • Significant insider selling over the past 3 months

  • Has a high level of debt

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