The Return Trends At Secure Energy Services (TSE:SES) Look Promising

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing 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. So when we looked at Secure Energy Services (TSE:SES) and its trend of ROCE, we really liked what we saw.

What Is Return On Capital Employed (ROCE)?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for Secure Energy Services:

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

0.15 = CA$351m ÷ (CA$2.8b - CA$459m) (Based on the trailing twelve months to December 2022).

So, Secure Energy Services has an ROCE of 15%. On its own, that's a standard return, however it's much better than the 11% generated by the Energy Services industry.

View our latest analysis for Secure Energy Services

In the above chart we have measured Secure Energy Services' 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 report for Secure Energy Services.

What Does the ROCE Trend For Secure Energy Services Tell Us?

We like the trends that we're seeing from Secure Energy Services. The data shows that returns on capital have increased substantially over the last five years to 15%. 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 84%. So we're very much inspired by what we're seeing at Secure Energy Services thanks to its ability to profitably reinvest capital.

The Bottom Line

To sum it up, Secure Energy Services has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Since the total return from the stock has been almost flat over the last five years, there might be an opportunity here if the valuation looks good. So researching this company further and determining whether or not these trends will continue seems justified.

On a final note, we've found 1 warning sign for Secure Energy Services that we think you should be aware of.

While Secure Energy Services 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.