Stock Analysis

Shareholders Would Enjoy A Repeat Of Trican Well Service's (TSE:TCW) Recent Growth In Returns

Source: Shutterstock

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at the ROCE trend of Trican Well Service (TSE:TCW) we really liked what we saw.

Return On Capital Employed (ROCE): What Is It?

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. The formula for this calculation on Trican Well Service is:

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

0.31 = CA$165m ÷ (CA$628m - CA$97m) (Based on the trailing twelve months to June 2023).

So, Trican Well Service has an ROCE of 31%. That's a fantastic return and not only that, it outpaces the average of 12% earned by companies in a similar industry.

Check out our latest analysis for Trican Well Service

TSX:TCW Return on Capital Employed November 10th 2023

In the above chart we have measured Trican Well Service's 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 report on analyst forecasts for the company.

The Trend Of ROCE

We're pretty happy with how the ROCE has been trending at Trican Well Service. The data shows that returns on capital have increased by 466% over the trailing five years. The company is now earning CA$0.3 per dollar of capital employed. Interestingly, the business may be becoming more efficient because it's applying 57% less capital than it was five years ago. Trican Well Service may be selling some assets so it's worth investigating if the business has plans for future investments to increase returns further still.

Our Take On Trican Well Service's ROCE

In summary, it's great to see that Trican Well Service has been able to turn things around and earn higher returns on lower amounts of capital. And a remarkable 254% 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 Trican Well Service can keep these trends up, it could have a bright future ahead.

If you want to continue researching Trican Well Service, you might be interested to know about the 1 warning sign that our analysis has discovered.

Trican Well Service is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

Valuation is complex, but we're helping make it simple.

Find out whether Trican Well Service is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at)

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.