If you're looking at a mature business that's past the growth phase, what are some of the underlying trends that pop up? More often than not, we'll see a declining return on capital employed (ROCE) and a declining amount of capital employed. Basically the company is earning less on its investments and it is also reducing its total assets. So after glancing at the trends within Kronos Worldwide (NYSE:KRO), we weren't too hopeful.
Return On Capital Employed (ROCE): What Is It?
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. Analysts use this formula to calculate it for Kronos Worldwide:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.023 = US$37m ÷ (US$1.9b - US$279m) (Based on the trailing twelve months to September 2025).
Thus, Kronos Worldwide has an ROCE of 2.3%. Ultimately, that's a low return and it under-performs the Chemicals industry average of 9.5%.
See our latest analysis for Kronos Worldwide
In the above chart we have measured Kronos Worldwide's 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 Kronos Worldwide .
What Does the ROCE Trend For Kronos Worldwide Tell Us?
There is reason to be cautious about Kronos Worldwide, given the returns are trending downwards. To be more specific, the ROCE was 5.6% five years ago, but since then it has dropped noticeably. And on the capital employed front, the business is utilizing roughly the same amount of capital as it was back then. This combination can be indicative of a mature business that still has areas to deploy capital, but the returns received aren't as high due potentially to new competition or smaller margins. If these trends continue, we wouldn't expect Kronos Worldwide to turn into a multi-bagger.
The Bottom Line On Kronos Worldwide's ROCE
In summary, it's unfortunate that Kronos Worldwide is generating lower returns from the same amount of capital. Investors haven't taken kindly to these developments, since the stock has declined 54% from where it was five years ago. Unless there is a shift to a more positive trajectory in these metrics, we would look elsewhere.
Kronos Worldwide does have some risks though, and we've spotted 3 warning signs for Kronos Worldwide that you might be interested in.
While Kronos Worldwide 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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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.