Return Trends At China Oil And Gas Group (HKG:603) Aren't Appealing

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing 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. Having said that, from a first glance at China Oil And Gas Group (HKG:603) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

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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 China Oil And Gas Group:

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

0.096 = HK$1.2b ÷ (HK$20b - HK$7.6b) (Based on the trailing twelve months to June 2025).

So, China Oil And Gas Group has an ROCE of 9.6%. In absolute terms, that's a low return, but it's much better than the Gas Utilities industry average of 7.3%.

See our latest analysis for China Oil And Gas Group

Historical performance is a great place to start when researching a stock so above you can see the gauge for China Oil And Gas Group's ROCE against it's prior returns. If you're interested in investigating China Oil And Gas Group's past further, check out this free graph covering China Oil And Gas Group's past earnings, revenue and cash flow.

So How Is China Oil And Gas Group's ROCE Trending?

There hasn't been much to report for China Oil And Gas Group's returns and its level of capital employed because both metrics have been steady for the past five years. It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. With that in mind, unless investment picks up again in the future, we wouldn't expect China Oil And Gas Group to be a multi-bagger going forward.

The Bottom Line

In summary, China Oil And Gas Group isn't compounding its earnings but is generating stable returns on the same amount of capital employed. Since the stock has declined 40% over the last five years, investors may not be too optimistic on this trend improving either. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere.

China Oil And Gas Group does come with some risks though, we found 3 warning signs in our investment analysis, and 1 of those can't be ignored...

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.