Seplat Energy (LON:SEPL) Is Doing The Right Things To Multiply Its Share Price

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So on that note, Seplat Energy (LON:SEPL) looks quite promising in regards to its trends of return on capital.

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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. The formula for this calculation on Seplat Energy is:

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

0.11 = US$516m ÷ (US$6.1b - US$1.5b) (Based on the trailing twelve months to June 2025).

So, Seplat Energy has an ROCE of 11%. That's a relatively normal return on capital, and it's around the 9.5% generated by the Oil and Gas industry.

See our latest analysis for Seplat Energy

Above you can see how the current ROCE for Seplat Energy 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 Seplat Energy for free.

So How Is Seplat Energy's ROCE Trending?

Investors would be pleased with what's happening at Seplat Energy. The data shows that returns on capital have increased substantially over the last five years to 11%. The amount of capital employed has increased too, by 82%. So we're very much inspired by what we're seeing at Seplat Energy thanks to its ability to profitably reinvest capital.

The Key Takeaway

To sum it up, Seplat Energy has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Since the stock has returned a staggering 675% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if Seplat Energy can keep these trends up, it could have a bright future ahead.

Like most companies, Seplat Energy does come with some risks, and we've found 1 warning sign that you should be aware of.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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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.