Returns Are Gaining Momentum At Anton Oilfield Services Group (HKG:3337)

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount 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, we've noticed some promising trends at Anton Oilfield Services Group (HKG:3337) so let's look a bit deeper.

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. To calculate this metric for Anton Oilfield Services Group, this is the formula:

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

0.061 = CN¥294m ÷ (CN¥7.9b - CN¥3.1b) (Based on the trailing twelve months to December 2020).

Therefore, Anton Oilfield Services Group has an ROCE of 6.1%. On its own that's a low return, but compared to the average of 4.2% generated by the Energy Services industry, it's much better.

Check out our latest analysis for Anton Oilfield Services Group

Above you can see how the current ROCE for Anton 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 to see what analysts are forecasting going forward, you should check out our free report for Anton Oilfield Services Group.

How Are Returns Trending?

We're glad to see that ROCE is heading in the right direction, even if it is still low at the moment. The data shows that returns on capital have increased substantially over the last five years to 6.1%. The amount of capital employed has increased too, by 35%. So we're very much inspired by what we're seeing at Anton Oilfield Services Group thanks to its ability to profitably reinvest capital.

In Conclusion...

To sum it up, Anton Oilfield Services Group has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Given the stock has declined 44% in the last five years, this could be a good investment if the valuation and other metrics are also appealing. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

Anton Oilfield Services Group does have some risks though, and we've spotted 1 warning sign for Anton Oilfield Services Group that you might be interested in.

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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