Armstrong World Industries Inc (AWI)

Return on total capital

		Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Earnings before interest and tax (EBIT)	US$ in thousands	386,900	333,600	287,700	263,500	-117,600
Long-term debt	US$ in thousands	502,600	564,300	651,100	606,400	690,500
Total stockholders’ equity	US$ in thousands	757,100	591,800	535,000	519,700	450,900
Return on total capital		30.71%	28.86%	24.26%	23.40%	-10.30%

December 31, 2024 calculation

Return on total capital = EBIT ÷ (Long-term debt + Total stockholders’ equity)
= $386,900K ÷ ($502,600K + $757,100K)
= 30.71%

Based on the data provided, Armstrong World Industries Inc's return on total capital has shown a significant improvement over the years. The return on total capital was negative at -10.30% as of December 31, 2020, indicating that the company initially struggled to generate returns on its total invested capital.

However, the subsequent years demonstrate a remarkable turnaround in performance. By December 31, 2021, the return on total capital had surged to 23.40%, reflecting a strong recovery and improved efficiency in capital utilization. This positive trend continued over the next few years, with returns of 24.26% by December 31, 2022, 28.86% by December 31, 2023, and further increasing to 30.71% by December 31, 2024.

The increasing trend in the return on total capital signifies that Armstrong World Industries Inc has been successful in enhancing its operational efficiency, optimizing its capital structure, or implementing strategic initiatives that have led to higher returns on the capital invested in the business. This improvement is a positive indicator of the company's financial health and its ability to generate profits relative to the total capital employed in its operations.