The Returns At Excelerate Energy (NYSE:EE) Aren't Growing

If you're looking for a multi-bagger, there's a few things to 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. However, after briefly looking over the numbers, we don't think Excelerate Energy (NYSE:EE) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

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 Excelerate Energy:

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

0.084 = US$229m ÷ (US$2.9b - US$173m) (Based on the trailing twelve months to September 2023).

Therefore, Excelerate Energy has an ROCE of 8.4%. Ultimately, that's a low return and it under-performs the Oil and Gas industry average of 17%.

View our latest analysis for Excelerate Energy

Above you can see how the current ROCE for Excelerate Energy 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 Excelerate Energy.

The Trend Of ROCE

The returns on capital haven't changed much for Excelerate Energy in recent years. The company has consistently earned 8.4% for the last three years, and the capital employed within the business has risen 34% in that time. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

The Bottom Line On Excelerate Energy's ROCE

In summary, Excelerate Energy has simply been reinvesting capital and generating the same low rate of return as before. And in the last year, the stock has given away 34% so the market doesn't look too hopeful on these trends strengthening any time soon. Therefore based on the analysis done in this article, we don't think Excelerate Energy has the makings of a multi-bagger.

If you'd like to know about the risks facing Excelerate Energy, we've discovered 1 warning sign that you should be aware of.

While Excelerate Energy 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.