Vista Energy. de (BMV:VISTAA) Is Achieving High Returns On Its Capital

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. 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. Speaking of which, we noticed some great changes in Vista Energy. de's (BMV:VISTAA) returns on capital, so let's have a look.

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. To calculate this metric for Vista Energy. de, this is the formula:

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

0.28 = US$699m ÷ (US$3.5b - US$1.0b) (Based on the trailing twelve months to September 2024).

Therefore, Vista Energy. de has an ROCE of 28%. In absolute terms that's a great return and it's even better than the Oil and Gas industry average of 11%.

View our latest analysis for Vista Energy. de

In the above chart we have measured Vista Energy. de's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Vista Energy. de .

What Does the ROCE Trend For Vista Energy. de Tell Us?

Investors would be pleased with what's happening at Vista Energy. de. Over the last five years, returns on capital employed have risen substantially to 28%. 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 108%. So we're very much inspired by what we're seeing at Vista Energy. de thanks to its ability to profitably reinvest capital.

On a side note, we noticed that the improvement in ROCE appears to be partly fueled by an increase in current liabilities. The current liabilities has increased to 29% of total assets, so the business is now more funded by the likes of its suppliers or short-term creditors. It's worth keeping an eye on this because as the percentage of current liabilities to total assets increases, some aspects of risk also increase.

The Bottom Line On Vista Energy. de's ROCE

To sum it up, Vista Energy. de has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And a remarkable 684% total return over the last five years tells us that investors are expecting more good things to come in the future. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

On a final note, we found 3 warning signs for Vista Energy. de (1 is significant) you should be aware of.

High returns are a key ingredient to strong performance, so check out our free list ofstocks 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.