Investors Will Want Park Aerospace's (NYSE:PKE) Growth In ROCE To Persist
If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at Park Aerospace (NYSE:PKE) and its trend of ROCE, we really liked what we saw.
We've discovered 2 warning signs about Park Aerospace. View them for free.
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 Park Aerospace:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.083 = US$9.4m ÷ (US$122m - US$9.3m) (Based on the trailing twelve months to March 2025).
So, Park Aerospace has an ROCE of 8.3%. In absolute terms, that's a low return and it also under-performs the Aerospace & Defense industry average of 11%.
See our latest analysis for Park Aerospace
Historical performance is a great place to start when researching a stock so above you can see the gauge for Park Aerospace's ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Park Aerospace.
Park Aerospace has not disappointed in regards to ROCE growth. We found that the returns on capital employed over the last five years have risen by 27%. The company is now earning US$0.08 per dollar of capital employed. In regards to capital employed, Park Aerospace appears to been achieving more with less, since the business is using 31% less capital to run its operation. A business that's shrinking its asset base like this isn't usually typical of a soon to be multi-bagger company.
In summary, it's great to see that Park Aerospace has been able to turn things around and earn higher returns on lower amounts of capital. Since the stock has returned a solid 49% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. In light of that, we think it's worth looking further into this stock because if Park Aerospace can keep these trends up, it could have a bright future ahead.
On a separate note, we've found 2 warning signs for Park Aerospace you'll probably want to know about.
While Park Aerospace isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.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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