Investors Will Want Metallus' (NYSE:MTUS) Growth In ROCE To Persist

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing 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. So when we looked at Metallus (NYSE:MTUS) 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 Metallus:

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

0.081 = US$75m ÷ (US$1.2b - US$239m) (Based on the trailing twelve months to March 2024).

So, Metallus has an ROCE of 8.1%. On its own, that's a low figure but it's around the 8.8% average generated by the Metals and Mining industry.

See our latest analysis for Metallus

Above you can see how the current ROCE for Metallus 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 analyst report for Metallus .

So How Is Metallus' ROCE Trending?

Metallus' ROCE growth is quite impressive. The figures show that over the last five years, ROCE has grown 383% whilst employing roughly the same amount of capital. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

What We Can Learn From Metallus' ROCE

In summary, we're delighted to see that Metallus has been able to increase efficiencies and earn higher rates of return on the same amount of capital. And a remarkable 207% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if Metallus can keep these trends up, it could have a bright future ahead.

Like most companies, Metallus does come with some risks, and we've found 1 warning sign that you should be aware of.

While Metallus 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.

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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.

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