Here's What To Make Of Manitowoc Company's (NYSE:MTW) Decelerating Rates Of Return

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. 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. However, after investigating Manitowoc Company (NYSE:MTW), we don't think it's current trends fit the mold of a multi-bagger.

What Is Return On Capital Employed (ROCE)?

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. To calculate this metric for Manitowoc Company, this is the formula:

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

0.082 = US$95m ÷ (US$1.8b - US$632m) (Based on the trailing twelve months to March 2024).

Thus, Manitowoc Company has an ROCE of 8.2%. In absolute terms, that's a low return and it also under-performs the Machinery industry average of 13%.

Check out our latest analysis for Manitowoc Company

Above you can see how the current ROCE for Manitowoc Company 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 Manitowoc Company for free.

So How Is Manitowoc Company's ROCE Trending?

Things have been pretty stable at Manitowoc Company, with its capital employed and returns on that capital staying somewhat the same for the last five years. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. So don't be surprised if Manitowoc Company doesn't end up being a multi-bagger in a few years time.

Our Take On Manitowoc Company's ROCE

We can conclude that in regards to Manitowoc Company's returns on capital employed and the trends, there isn't much change to report on. Since the stock has declined 28% over the last five years, investors may not be too optimistic on this trend improving either. Therefore based on the analysis done in this article, we don't think Manitowoc Company has the makings of a multi-bagger.

One more thing: We've identified 2 warning signs with Manitowoc Company (at least 1 which can't be ignored) , and understanding them would certainly be useful.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com