Investors Met With Slowing Returns on Capital At Yantai Jereh Oilfield Services Group (SZSE:002353)

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. 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, the ROCE of Yantai Jereh Oilfield Services Group (SZSE:002353) looks decent, right now, so lets see what the trend of returns can tell us.

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. The formula for this calculation on Yantai Jereh Oilfield Services Group is:

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

0.11 = CN¥2.7b ÷ (CN¥35b - CN¥9.9b) (Based on the trailing twelve months to September 2024).

So, Yantai Jereh Oilfield Services Group has an ROCE of 11%. In absolute terms, that's a satisfactory return, but compared to the Energy Services industry average of 5.2% it's much better.

See our latest analysis for Yantai Jereh Oilfield Services Group

Above you can see how the current ROCE for Yantai Jereh Oilfield Services Group compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Yantai Jereh Oilfield Services Group for free.

What Does the ROCE Trend For Yantai Jereh Oilfield Services Group Tell Us?

The trend of ROCE doesn't stand out much, but returns on a whole are decent. Over the past five years, ROCE has remained relatively flat at around 11% and the business has deployed 155% more capital into its operations. 11% is a pretty standard return, and it provides some comfort knowing that Yantai Jereh Oilfield Services Group has consistently earned this amount. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

Our Take On Yantai Jereh Oilfield Services Group's ROCE

To sum it up, Yantai Jereh Oilfield Services Group has simply been reinvesting capital steadily, at those decent rates of return. However, over the last five years, the stock has only delivered a 21% return to shareholders who held over that period. That's why it could be worth your time looking into this stock further to discover if it has more traits of a multi-bagger.

If you want to continue researching Yantai Jereh Oilfield Services Group, you might be interested to know about the 1 warning sign that our analysis has discovered.

While Yantai Jereh Oilfield Services Group 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.