Why The 26% Return On Capital At Vista Energy. de (BMV:VISTAA) Should Have Your Attention

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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at the ROCE trend of Vista Energy. de (BMV:VISTAA) we really liked what we saw.

What Is Return On Capital Employed (ROCE)?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for Vista Energy. de:

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

0.26 = US$639m ÷ (US$3.2b - US$799m) (Based on the trailing twelve months to June 2024).

Therefore, Vista Energy. de has an ROCE of 26%. In absolute terms that's a great return and it's even better than the Oil and Gas industry average of 13%.

View 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're interested, you can view the analysts predictions in our free analyst report for Vista Energy. de .

What The Trend Of ROCE Can Tell Us

The trends we've noticed at Vista Energy. de are quite reassuring. The data shows that returns on capital have increased substantially over the last five years to 26%. Basically the business is earning more per dollar of capital invested and in addition to that, 141% more capital is being employed now too. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

The Bottom Line On Vista Energy. de's ROCE

In summary, it's great to see that Vista Energy. de can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. Since the stock has returned a staggering 871% 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.

One more thing: We've identified 3 warning signs with Vista Energy. de (at least 2 which shouldn't be ignored) , and understanding them would certainly be useful.

Vista Energy. de is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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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.