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The Trends At National Presto Industries (NYSE:NPK) That You Should Know About

To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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 briefly looking over the numbers, we don't think National Presto Industries (NYSE:NPK) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

Understanding Return On Capital Employed (ROCE)

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on National Presto Industries is:

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

0.16 = US$56m ÷ (US$406m - US$55m) (Based on the trailing twelve months to June 2020).

So, National Presto Industries has an ROCE of 16%. In absolute terms, that's a satisfactory return, but compared to the Aerospace & Defense industry average of 9.5% it's much better.

Check out our latest analysis for National Presto Industries

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Historical performance is a great place to start when researching a stock so above you can see the gauge for National Presto Industries' ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of National Presto Industries, check out these free graphs here.

The Trend Of ROCE

There hasn't been much to report for National Presto Industries' returns and its level of capital employed because both metrics have been steady for the past five years. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. So unless we see a substantial change at National Presto Industries in terms of ROCE and additional investments being made, we wouldn't hold our breath on it being a multi-bagger.

Our Take On National Presto Industries' ROCE

We can conclude that in regards to National Presto Industries' returns on capital employed and the trends, there isn't much change to report on. And with the stock having returned a mere 26% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. So if you're looking for a multi-bagger, the underlying trends indicate you may have better chances elsewhere.

If you'd like to know about the risks facing National Presto Industries, 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.

This article by Simply Wall St is general in nature. 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.