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Lockheed Martin outperforms with high ROCE and increased capital deployment

Published Oct 29, 2023 12:58
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Lockheed Martin (NYSE:LMT), the prominent player in the Aerospace & Defense industry, has showcased a consistent performance over the past five years, maintaining a Return On Capital Employed (ROCE) of 23%, which significantly surpasses the industry average of 9.7%. This metric, which gauges pre-tax profit to capital employed, is calculated as: Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities).

The company's robust ROCE is indicative of its efficient utilization of capital to generate profits. Alongside this high ROCE, Lockheed Martin has also enhanced its capital deployment by 30% in the past five years. This increase in capital deployment suggests that the company is reinvesting its earnings at an escalating rate, leading to substantial returns.

These financial indicators - a growing ROCE and an increase in capital deployment - are key traits that investors seek when identifying potential multi-bagger stocks. A multi-bagger stock is one that multiplies its value several times over, offering significant returns to its shareholders.

Given its high ROCE, increased capital deployment, total assets, and current liabilities over this five-year performance period, Lockheed Martin emerges as a strong contender for being a potential multi-bagger stock. The company's ability to reinvest earnings at increasing rates while maintaining high returns positions it favorably for future growth.

InvestingPro Insights

Our InvestingPro data further supports the promising outlook for Lockheed Martin. The company's market cap stands at a robust 110.0B USD, and it operates with a P/E ratio of 16.12, indicating a reasonable valuation given its earnings. Over the last twelve months as of Q3 2023, the company has seen a revenue growth of 4.58%, reflecting its ability to generate increased sales.

Two key InvestingPro Tips that align with this analysis are that Lockheed Martin has raised its dividend for 21 consecutive years and that the stock generally trades with low price volatility. These factors, combined with the company's high return on invested capital, further solidify its potential as a multi-bagger stock.

For more detailed insights and tips, check out our InvestingPro product which includes over 10 additional tips for Lockheed Martin on our pro pricing page.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Lockheed Martin outperforms with high ROCE and increased capital deployment
 

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