We Think Mueller Industries (NYSE:MLI) Might Have The DNA Of A Multi-Bagger
What trends should we look for it we want to identify stocks that can multiply in value over the long term? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. And in light of that, the trends we're seeing at Mueller Industries' (NYSE:MLI) look very promising so lets take a look.
What Is Return On Capital Employed (ROCE)?
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. The formula for this calculation on Mueller Industries is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.30 = US$739m ÷ (US$2.8b - US$317m) (Based on the trailing twelve months to December 2023).
Therefore, Mueller Industries has an ROCE of 30%. In absolute terms that's a great return and it's even better than the Machinery industry average of 12%.
View our latest analysis for Mueller Industries
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 to see what analysts are forecasting going forward, you should check out our free analyst report for Mueller Industries .
What Can We Tell From Mueller Industries' ROCE Trend?
The trends we've noticed at Mueller Industries are quite reassuring. Over the last five years, returns on capital employed have risen substantially to 30%. The amount of capital employed has increased too, by 115%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.
What We Can Learn From 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. And a remarkable 217% 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 Mueller Industries can keep these trends up, it could have a bright future ahead.
If you want to continue researching Mueller Industries, you might be interested to know about the 1 warning sign that our analysis has discovered.
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.
