If you're looking for a multi-bagger, there's a few things to keep an eye out for. 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. However, after investigating BWX Technologies (NYSE:BWXT), we don't think it's current trends fit the mold of a multi-bagger.

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 BWX Technologies is:

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

0.14 = US$332m ÷ (US$2.8b - US$409m) (Based on the trailing twelve months to June 2024).

So, BWX Technologies has an ROCE of 14%. In absolute terms, that's a satisfactory return, but compared to the Aerospace & Defense industry average of 11% it's much better.

See our latest analysis for BWX Technologies

In the above chart we have measured BWX Technologies' 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 analyst report for BWX Technologies .

What Can We Tell From BWX Technologies' ROCE Trend?

In terms of BWX Technologies' historical ROCE movements, the trend isn't fantastic. Over the last five years, returns on capital have decreased to 14% from 18% five years ago. Although, given both revenue and the amount of assets employed in the business have increased, it could suggest the company is investing in growth, and the extra capital has led to a short-term reduction in ROCE. If these investments prove successful, this can bode very well for long term stock performance.

The Bottom Line On BWX Technologies' ROCE

Even though returns on capital have fallen in the short term, we find it promising that revenue and capital employed have both increased for BWX Technologies. And long term investors must be optimistic going forward because the stock has returned a huge 125% to shareholders in the last five years. So while the underlying trends could already be accounted for by investors, we still think this stock is worth looking into further.

If you'd like to know about the risks facing BWX Technologies, we've discovered 1 warning sign that you should be aware of.

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.