CNOOC Energy Technology & Services (SHSE:600968) Might Have The Makings Of A Multi-Bagger

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So when we looked at CNOOC Energy Technology & Services (SHSE:600968) and its trend of ROCE, we really liked what we saw.

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. To calculate this metric for CNOOC Energy Technology & Services, this is the formula:

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

0.13 = CN¥3.9b ÷ (CN¥46b - CN¥16b) (Based on the trailing twelve months to September 2024).

Therefore, CNOOC Energy Technology & Services has an ROCE of 13%. In absolute terms, that's a satisfactory return, but compared to the Energy Services industry average of 5.5% it's much better.

View our latest analysis for CNOOC Energy Technology & Services

In the above chart we have measured CNOOC Energy Technology & Services' 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 analyst report for CNOOC Energy Technology & Services .

What Can We Tell From CNOOC Energy Technology & Services' ROCE Trend?

Investors would be pleased with what's happening at CNOOC Energy Technology & Services. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 13%. The amount of capital employed has increased too, by 56%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

The Key Takeaway

All in all, it's terrific to see that CNOOC Energy Technology & Services is reaping the rewards from prior investments and is growing its capital base. And with a respectable 68% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. Therefore, we think it would be worth your time to check if these trends are going to continue.

Before jumping to any conclusions though, we need to know what value we're getting for the current share price. That's where you can check out our FREE intrinsic value estimation for 600968 that compares the share price and estimated value.

While CNOOC Energy Technology & 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.