Yahoo Finance There's Been No Shortage Of Growth Recently For Oceaneering International's (NYSE:OII) Returns On Capital
If you're looking for a multi-bagger, there's a few things to keep an eye out for. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. With that in mind, we've noticed some promising trends at Oceaneering International (NYSE:OII) so let's look a bit deeper.
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. Analysts use this formula to calculate it for Oceaneering International:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.018 = US$25m ÷ (US$1.9b - US$473m) (Based on the trailing twelve months to June 2022).
So, Oceaneering International has an ROCE of 1.8%. Ultimately, that's a low return and it under-performs the Energy Services industry average of 5.8%.
Check out our latest analysis for Oceaneering International
Above you can see how the current ROCE for Oceaneering International 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 Oceaneering International here for free.
What Can We Tell From Oceaneering International's ROCE Trend?
It's nice to see that ROCE is headed in the right direction, even if it is still relatively low. The data shows that returns on capital have increased by 1,651% over the trailing five years. The company is now earning US$0.02 per dollar of capital employed. Interestingly, the business may be becoming more efficient because it's applying 46% less capital than it was five years ago. Oceaneering International may be selling some assets so it's worth investigating if the business has plans for future investments to increase returns further still.
What We Can Learn From Oceaneering International's ROCE
In a nutshell, we're pleased to see that Oceaneering International has been able to generate higher returns from less capital. And since the stock has fallen 60% over the last five years, there might be an opportunity here. That being the case, research into the company's current valuation metrics and future prospects seems fitting.
If you want to continue researching Oceaneering International, you might be interested to know about the 1 warning sign that our analysis has discovered.
While Oceaneering International 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.
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