TotalEnergies EP Gabon Société Anonyme (EPA:EC) Might Have The Makings Of A Multi-Bagger

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out 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. 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 TotalEnergies EP Gabon Société Anonyme (EPA:EC) and its trend of ROCE, we really liked what we saw.

Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for TotalEnergies EP Gabon Société Anonyme:

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

0.053 = US$146m ÷ (US$3.0b - US$236m) (Based on the trailing twelve months to June 2024).

So, TotalEnergies EP Gabon Société Anonyme has an ROCE of 5.3%. Ultimately, that's a low return and it under-performs the Oil and Gas industry average of 12%.

See our latest analysis for TotalEnergies EP Gabon Société Anonyme

Historical performance is a great place to start when researching a stock so above you can see the gauge for TotalEnergies EP Gabon Société Anonyme's ROCE against it's prior returns. If you'd like to look at how TotalEnergies EP Gabon Société Anonyme has performed in the past in other metrics, you can view this free graph of TotalEnergies EP Gabon Société Anonyme's past earnings, revenue and cash flow.

What Does the ROCE Trend For TotalEnergies EP Gabon Société Anonyme Tell Us?

We're pretty happy with how the ROCE has been trending at TotalEnergies EP Gabon Société Anonyme. The figures show that over the last five years, returns on capital have grown by 29%. The company is now earning US$0.05 per dollar of capital employed. Speaking of capital employed, the company is actually utilizing 32% less than it was five years ago, which can be indicative of a business that's improving its efficiency. If this trend continues, the business might be getting more efficient but it's shrinking in terms of total assets.

What We Can Learn From TotalEnergies EP Gabon Société Anonyme's ROCE

In the end, TotalEnergies EP Gabon Société Anonyme has proven it's capital allocation skills are good with those higher returns from less amount of capital. And a remarkable 515% total return over the last five years tells us that investors are expecting more good things to come in the future. Therefore, we think it would be worth your time to check if these trends are going to continue.

On a final note, we found 4 warning signs for TotalEnergies EP Gabon Société Anonyme (1 is a bit unpleasant) you should be aware of.

While TotalEnergies EP Gabon Société Anonyme 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.