Return Trends At Vulcan Materials (NYSE:VMC) Aren't Appealing

Yahoo

27-05-2025

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. In light of that, when we looked at Vulcan Materials (NYSE:VMC) and its ROCE trend, we weren't exactly thrilled.
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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 Vulcan Materials is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.092 = US$1.5b ÷ (US$17b - US$797m) (Based on the trailing twelve months to March 2025).
So, Vulcan Materials has an ROCE of 9.2%. Ultimately, that's a low return and it under-performs the Basic Materials industry average of 14%.
View our latest analysis for Vulcan Materials
Above you can see how the current ROCE for Vulcan Materials 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 Vulcan Materials .
In terms of Vulcan Materials' historical ROCE trend, it doesn't exactly demand attention. Over the past five years, ROCE has remained relatively flat at around 9.2% and the business has deployed 57% more capital into its operations. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.
In conclusion, Vulcan Materials has been investing more capital into the business, but returns on that capital haven't increased. Investors must think there's better things to come because the stock has knocked it out of the park, delivering a 153% gain to shareholders who have held over the last five years. Ultimately, if the underlying trends persist, we wouldn't hold our breath on it being a multi-bagger going forward.
Vulcan Materials does have some risks though, and we've spotted 2 warning signs for Vulcan Materials that you might be interested in.
While Vulcan Materials may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.
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