The Returns At Solaris Oilfield Infrastructure (NYSE:SOI) Aren't Growing

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. 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. With that in mind, the ROCE of Solaris Oilfield Infrastructure (NYSE:SOI) looks decent, right now, so lets see what the trend of returns can tell us.

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. The formula for this calculation on Solaris Oilfield Infrastructure is:

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

0.13 = US$53m ÷ (US$473m - US$55m) (Based on the trailing twelve months to March 2023).

Thus, Solaris Oilfield Infrastructure has an ROCE of 13%. On its own, that's a standard return, however it's much better than the 9.8% generated by the Energy Services industry.

Check out our latest analysis for Solaris Oilfield Infrastructure

Above you can see how the current ROCE for Solaris Oilfield Infrastructure compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Solaris Oilfield Infrastructure here for free.

What The Trend Of ROCE Can Tell Us

While the current returns on capital are decent, they haven't changed much. The company has employed 43% more capital in the last five years, and the returns on that capital have remained stable at 13%. Since 13% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

The Bottom Line

The main thing to remember is that Solaris Oilfield Infrastructure has proven its ability to continually reinvest at respectable rates of return. However, despite the favorable fundamentals, the stock has fallen 36% over the last five years, so there might be an opportunity here for astute investors. For that reason, savvy investors might want to look further into this company in case it's a prime investment.

One more thing to note, we've identified 1 warning sign with Solaris Oilfield Infrastructure and understanding this should be part of your investment process.

While Solaris Oilfield Infrastructure 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.