Returns Are Gaining Momentum At Bonterra Energy (TSE:BNE)

If you're looking for a multi-bagger, there's a few things to keep an eye out for. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount 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 Bonterra Energy (TSE:BNE) so let's look a bit deeper.

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Understanding Return On Capital Employed (ROCE)

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for Bonterra Energy:

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

0.034 = CA$31m ÷ (CA$979m - CA$61m) (Based on the trailing twelve months to March 2025).

Thus, Bonterra Energy has an ROCE of 3.4%. In absolute terms, that's a low return and it also under-performs the Oil and Gas industry average of 9.0%.

See our latest analysis for Bonterra Energy

Above you can see how the current ROCE for Bonterra Energy compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Bonterra Energy .

What The Trend Of ROCE Can Tell Us

We're glad to see that ROCE is heading in the right direction, even if it is still low at the moment. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 3.4%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 34%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

The Bottom Line

All in all, it's terrific to see that Bonterra Energy is reaping the rewards from prior investments and is growing its capital base. And a remarkable 127% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if Bonterra Energy can keep these trends up, it could have a bright future ahead.

One more thing, we've spotted 3 warning signs facing Bonterra Energy that you might find interesting.

While Bonterra Energy 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.