The Return Trends At MRC Global (NYSE:MRC) Look Promising

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at MRC Global (NYSE:MRC) and its trend of ROCE, we really liked what we saw.

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

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for MRC Global:

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

0.11 = US$141m ÷ (US$1.9b - US$564m) (Based on the trailing twelve months to December 2022).

Therefore, MRC Global has an ROCE of 11%. In isolation, that's a pretty standard return but against the Trade Distributors industry average of 16%, it's not as good.

Check out our latest analysis for MRC Global

In the above chart we have measured MRC Global's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free report for MRC Global.

What The Trend Of ROCE Can Tell Us

We're pretty happy with how the ROCE has been trending at MRC Global. The figures show that over the last five years, returns on capital have grown by 309%. That's not bad because this tells for every dollar invested (capital employed), the company is increasing the amount earned from that dollar. In regards to capital employed, MRC Global appears to been achieving more with less, since the business is using 25% less capital to run its operation. MRC Global may be selling some assets so it's worth investigating if the business has plans for future investments to increase returns further still.

The Bottom Line On MRC Global's ROCE

In summary, it's great to see that MRC Global has been able to turn things around and earn higher returns on lower amounts of capital. And since the stock has fallen 43% over the last five years, there might be an opportunity here. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

If you'd like to know more about MRC Global, we've spotted 2 warning signs, and 1 of them is a bit concerning.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high 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.