Returns On Capital Are Showing Encouraging Signs At CNOOC (HKG:883)

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. 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, CNOOC (HKG:883) looks quite promising in regards to its trends of return on capital.

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What Is 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 CNOOC:

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

0.18 = CN¥176b ÷ (CN¥1.1t - CN¥136b) (Based on the trailing twelve months to June 2025).

Thus, CNOOC has an ROCE of 18%. On its own, that's a standard return, however it's much better than the 5.7% generated by the Oil and Gas industry.

Check out our latest analysis for CNOOC

Above you can see how the current ROCE for CNOOC 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 analyst report for CNOOC .

The Trend Of ROCE

CNOOC is displaying some positive trends. The data shows that returns on capital have increased substantially over the last five years to 18%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 50%. So we're very much inspired by what we're seeing at CNOOC thanks to its ability to profitably reinvest capital.

What We Can Learn From CNOOC's ROCE

To sum it up, CNOOC 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 307% to shareholders over the last five years, it looks like investors are recognizing these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

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

While CNOOC may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.