Petrotx - Limited Partnership (TLV:PTX) Is Doing The Right Things To Multiply Its Share Price

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's 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 Petrotx - Limited Partnership (TLV:PTX) so let's look a bit deeper.

Return On Capital Employed (ROCE): What is it?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Petrotx - Limited Partnership, this is the formula:

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

0.18 = US$4.5m ÷ (US$33m - US$8.2m) (Based on the trailing twelve months to September 2021).

Therefore, Petrotx - Limited Partnership has an ROCE of 18%. On its own, that's a standard return, however it's much better than the 9.1% generated by the Oil and Gas industry.

Check out our latest analysis for Petrotx - Limited Partnership

Historical performance is a great place to start when researching a stock so above you can see the gauge for Petrotx - Limited Partnership's ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Petrotx - Limited Partnership, check out these free graphs here.

What Can We Tell From Petrotx - Limited Partnership's ROCE Trend?

We're delighted to see that Petrotx - Limited Partnership is reaping rewards from its investments and is now generating some pre-tax profits. The company was generating losses five years ago, but now it's earning 18% which is a sight for sore eyes. And unsurprisingly, like most companies trying to break into the black, Petrotx - Limited Partnership is utilizing 1,629% more capital than it was five years ago. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.

The Bottom Line On Petrotx - Limited Partnership's ROCE

To the delight of most shareholders, Petrotx - Limited Partnership has now broken into profitability. However the stock is down a substantial 81% in the last five years so there could be other areas of the business hurting its prospects. Regardless, we think the underlying fundamentals warrant this stock for further investigation.

If you want to know some of the risks facing Petrotx - Limited Partnership we've found 3 warning signs (2 are potentially serious!) that you should be aware of before investing here.

While Petrotx - Limited Partnership 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.