Armstrong World Industries (NYSE:AWI) Is Doing The Right Things To Multiply Its Share Price

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Typically, we’ll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So on that note, Armstrong World Industries (NYSE:AWI) looks quite promising in regards to its trends of return on capital.

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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 Armstrong World Industries is:

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

0.19 = US$314m ÷ (US$1.9b – US$261m) (Based on the trailing twelve months to September 2025).

So, Armstrong World Industries has an ROCE of 19%. In absolute terms, that’s a satisfactory return, but compared to the Building industry average of 13% it’s much better.

View our latest analysis for Armstrong World Industries

In the above chart we have measured Armstrong World Industries’ prior ROCE against its prior performance, but the future is arguably more important. If you’re interested, you can view the analysts predictions in our free analyst report for Armstrong World Industries .

Armstrong World Industries has not disappointed with their ROCE growth. The figures show that over the last five years, ROCE has grown 43% whilst employing roughly the same amount of capital. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. On that front, things are looking good so it’s worth exploring what management has said about growth plans going forward.

To bring it all together, Armstrong World Industries has done well to increase the returns it’s generating from its capital employed. Since the stock has returned a staggering 155% to shareholders over the last five years, it looks like investors are recognizing these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

On the other side of ROCE, we have to consider valuation. That’s why we have a FREE intrinsic value estimation for AWI on our platform that is definitely worth checking out.

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

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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.