Mueller Industries (NYSE:MLI) Could Become A Multi-Bagger

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, 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 Mueller Industries (NYSE:MLI) looks great, so lets see what the trend 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. The formula for this calculation on Mueller Industries is:

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

0.49 = US$855m ÷ (US$2.1b - US$375m) (Based on the trailing twelve months to September 2022).

Therefore, Mueller Industries has an ROCE of 49%. In absolute terms that's a great return and it's even better than the Machinery industry average of 11%.

Check out the opportunities and risks within the US Machinery industry.

Above you can see how the current ROCE for Mueller Industries compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Mueller Industries here for free.

How Are Returns Trending?

Mueller Industries is displaying some positive trends. The data shows that returns on capital have increased substantially over the last five years to 49%. The amount of capital employed has increased too, by 72%. So we're very much inspired by what we're seeing at Mueller Industries thanks to its ability to profitably reinvest capital.

The Bottom Line On Mueller Industries' ROCE

To sum it up, Mueller Industries has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Since the stock has returned a staggering 110% to shareholders over the last five years, it looks like investors are recognizing these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

One more thing, we've spotted 1 warning sign facing Mueller Industries that you might find interesting.

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.