Returns At Schoeller-Bleckmann Oilfield Equipment (VIE:SBO) Are On The Way Up

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? 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, Schoeller-Bleckmann Oilfield Equipment (VIE:SBO) looks quite promising in regards to its trends of return on capital.

Understanding Return On Capital Employed (ROCE)

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 Schoeller-Bleckmann Oilfield Equipment is:

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

0.15 = €91m ÷ (€903m - €294m) (Based on the trailing twelve months to December 2022).

Thus, Schoeller-Bleckmann Oilfield Equipment has an ROCE of 15%. On its own, that's a standard return, however it's much better than the 6.7% generated by the Energy Services industry.

View our latest analysis for Schoeller-Bleckmann Oilfield Equipment

Above you can see how the current ROCE for Schoeller-Bleckmann Oilfield Equipment compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

So How Is Schoeller-Bleckmann Oilfield Equipment's ROCE Trending?

Schoeller-Bleckmann Oilfield Equipment is showing promise given that its ROCE is trending up and to the right. The figures show that over the last five years, ROCE has grown 214% whilst employing roughly the same amount of capital. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

For the record though, there was a noticeable increase in the company's current liabilities over the period, so we would attribute some of the ROCE growth to that. Essentially the business now has suppliers or short-term creditors funding about 33% of its operations, which isn't ideal. Keep an eye out for future increases because when the ratio of current liabilities to total assets gets particularly high, this can introduce some new risks for the business.

The Key Takeaway

To sum it up, Schoeller-Bleckmann Oilfield Equipment is collecting higher returns from the same amount of capital, and that's impressive. Given the stock has declined 43% in the last five years, this could be a good investment if the valuation and other metrics are also appealing. So researching this company further and determining whether or not these trends will continue seems justified.

If you want to continue researching Schoeller-Bleckmann Oilfield Equipment, you might be interested to know about the 2 warning signs that our analysis has discovered.

While Schoeller-Bleckmann Oilfield Equipment 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.