Investors Met With Slowing Returns on Capital At Crane NXT (NYSE:CXT)

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. In light of that, when we looked at Crane NXT (NYSE:CXT) and its ROCE trend, we weren't exactly thrilled.

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Understanding 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. The formula for this calculation on Crane NXT is:

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

0.15 = US$289m ÷ (US$2.4b - US$564m) (Based on the trailing twelve months to March 2025).

So, Crane NXT has an ROCE of 15%. In absolute terms, that's a satisfactory return, but compared to the Electronic industry average of 10% it's much better.

Check out our latest analysis for Crane NXT

Above you can see how the current ROCE for Crane NXT 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 Crane NXT .

What Does the ROCE Trend For Crane NXT Tell Us?

There hasn't been much to report for Crane NXT's returns and its level of capital employed because both metrics have been steady for the past three years. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. With that in mind, unless investment picks up again in the future, we wouldn't expect Crane NXT to be a multi-bagger going forward.

What We Can Learn From Crane NXT's ROCE

In a nutshell, Crane NXT has been trudging along with the same returns from the same amount of capital over the last three years. And with the stock having returned a mere 1.7% in the last year to shareholders, you could argue that they're aware of these lackluster trends. As a result, if you're hunting for a multi-bagger, we think you'd have more luck elsewhere.

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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.