Helix Energy Solutions Group (NYSE:HLX) Might Have The Makings Of A Multi-Bagger

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, Helix Energy Solutions Group (NYSE:HLX) looks quite promising in regards to its trends of return on capital.

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 Helix Energy Solutions Group, this is the formula:

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

0.05 = US$106m ÷ (US$2.6b - US$449m) (Based on the trailing twelve months to December 2023).

Thus, Helix Energy Solutions Group has an ROCE of 5.0%. In absolute terms, that's a low return and it also under-performs the Energy Services industry average of 12%.

Check out our latest analysis for Helix Energy Solutions Group

Above you can see how the current ROCE for Helix Energy Solutions Group 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 Helix Energy Solutions Group .

What The Trend Of ROCE Can Tell Us

Helix Energy Solutions Group's ROCE growth is quite impressive. The figures show that over the last five years, ROCE has grown 111% whilst employing roughly the same amount of capital. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. It's worth looking deeper into this though because while it's great that the business is more efficient, it might also mean that going forward the areas to invest internally for the organic growth are lacking.

The Bottom Line On Helix Energy Solutions Group's ROCE

To bring it all together, Helix Energy Solutions Group has done well to increase the returns it's generating from its capital employed. Since the stock has only returned 37% to shareholders over the last five years, the promising fundamentals may not be recognized yet by investors. Given that, we'd look further into this stock in case it has more traits that could make it multiply in the long term.

While Helix Energy Solutions Group looks impressive, no company is worth an infinite price. The intrinsic value infographic for HLX helps visualize whether it is currently trading for a fair price.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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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.