Vista Energy. de (BMV:VISTAA) Knows How To Allocate Capital Effectively

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. And in light of that, the trends we're seeing at Vista Energy. de's (BMV:VISTAA) look very promising so lets take a look.

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 Vista Energy. de, this is the formula:

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

0.23 = US$480m ÷ (US$2.5b - US$435m) (Based on the trailing twelve months to September 2023).

So, Vista Energy. de has an ROCE of 23%. In absolute terms that's a great return and it's even better than the Oil and Gas industry average of 11%.

See our latest analysis for Vista Energy. de

Above you can see how the current ROCE for Vista Energy. de 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 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. The data shows that returns on capital have increased substantially over the last five years to 23%. The amount of capital employed has increased too, by 122%. So we're very much inspired by what we're seeing at Vista Energy. de thanks to its ability to profitably reinvest capital.

Our Take On Vista Energy. de's ROCE

All in all, it's terrific to see that Vista Energy. de is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 221% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if Vista Energy. de can keep these trends up, it could have a bright future ahead.

If you want to know some of the risks facing Vista Energy. de we've found 4 warning signs (2 don't sit too well with us!) that you should be aware of before investing here.

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.