Investors Will Want Mattel's (NASDAQ:MAT) Growth In ROCE To Persist

Simply Wall St · 07/02 17:58

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, 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. With that in mind, we've noticed some promising trends at Mattel (NASDAQ:MAT) so let's look a bit deeper.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Mattel is:

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

0.15 = US$739m ÷ (US$6.2b - US$1.1b) (Based on the trailing twelve months to March 2025).

Thus, Mattel has an ROCE of 15%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Leisure industry average of 13%.

Check out our latest analysis for Mattel

roce
NasdaqGS:MAT Return on Capital Employed July 2nd 2025

In the above chart we have measured Mattel'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 Mattel .

What The Trend Of ROCE Can Tell Us

Investors would be pleased with what's happening at Mattel. Over the last five years, returns on capital employed have risen substantially to 15%. The amount of capital employed has increased too, by 38%. So we're very much inspired by what we're seeing at Mattel thanks to its ability to profitably reinvest capital.

The Bottom Line On Mattel's ROCE

In summary, it's great to see that Mattel can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And with a respectable 99% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

If you want to continue researching Mattel, you might be interested to know about the 1 warning sign that our analysis has discovered.

While Mattel isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.