The Returns At Consolidated Edison (NYSE:ED) 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. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing 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. Although, when we looked at Consolidated Edison (NYSE:ED), it didn't seem to tick all of these boxes.

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Understanding 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. The formula for this calculation on Consolidated Edison is:

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

0.052 = US$3.4b ÷ (US$71b - US$4.8b) (Based on the trailing twelve months to March 2025).

Thus, Consolidated Edison has an ROCE of 5.2%. Even though it's in line with the industry average of 5.1%, it's still a low return by itself.

View our latest analysis for Consolidated Edison

In the above chart we have measured Consolidated Edison'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 Consolidated Edison .

What Can We Tell From Consolidated Edison's ROCE Trend?

There are better returns on capital out there than what we're seeing at Consolidated Edison. The company has employed 25% more capital in the last five years, and the returns on that capital have remained stable at 5.2%. 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.

What We Can Learn From Consolidated Edison's ROCE

In conclusion, Consolidated Edison has been investing more capital into the business, but returns on that capital haven't increased. Since the stock has gained an impressive 66% over the last five years, investors must think there's better things to come. Ultimately, if the underlying trends persist, we wouldn't hold our breath on it being a multi-bagger going forward.

Consolidated Edison does have some risks, we noticed 2 warning signs (and 1 which is a bit unpleasant) we think you should know about.

While Consolidated Edison may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.