Investors Will Want Tsakos Energy Navigation's (NYSE:TEN) Growth In ROCE To Persist

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So when we looked at Tsakos Energy Navigation (NYSE:TEN) and its trend of ROCE, we really liked what we saw.

Understanding Return On Capital Employed (ROCE)

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for Tsakos Energy Navigation, this is the formula:

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

0.083 = US$271m ÷ (US$3.7b - US$436m) (Based on the trailing twelve months to September 2024).

So, Tsakos Energy Navigation has an ROCE of 8.3%. In absolute terms, that's a low return and it also under-performs the Oil and Gas industry average of 12%.

View our latest analysis for Tsakos Energy Navigation

In the above chart we have measured Tsakos Energy Navigation's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Tsakos Energy Navigation .

How Are Returns Trending?

Tsakos Energy Navigation is showing promise given that its ROCE is trending up and to the right. The figures show that over the last five years, ROCE has grown 176% whilst employing roughly the same amount of capital. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

The Key Takeaway

In summary, we're delighted to see that Tsakos Energy Navigation has been able to increase efficiencies and earn higher rates of return on the same amount of capital. Considering the stock has delivered 26% to its stockholders over the last five years, it may be fair to think that investors aren't fully aware of the promising trends yet. So exploring more about this stock could uncover a good opportunity, if the valuation and other metrics stack up.

One more thing: We've identified 3 warning signs with Tsakos Energy Navigation (at least 1 which is concerning) , and understanding them would certainly be useful.

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.