Helix Energy Solutions Group (NYSE: HLX) Seeks To Continue Growing Return On Capital
What are the first trends to look for to identify a title that could multiply over the long term? Generally, we will want to notice a growing trend return on capital employed (ROCE) and at the same time, a based capital employed. This shows us that it is a composing machine, capable of continually reinvesting its profits in the business and generating higher returns. With that in mind, we’ve noticed some promising trends at Helix Energy Solutions Group (NYSE: HLX) so let’s look a little deeper.
Understanding Return on Capital Employed (ROCE)
For those who don’t know what ROCE is, it measures the amount of pre-tax profit a business can generate from the capital employed in its business. Analysts use this formula to calculate it for Helix Energy Solutions Group:
Return on capital employed = Profit before interest and taxes (EBIT) Ã· (Total assets – Current liabilities)
0.015 = US $ 33 million Ã· (US $ 2.4 billion – US $ 218 million) (Based on the last twelve months up to March 2021).
Therefore, Helix Energy Solutions Group has a ROCE of 1.5%. At the end of the day, that’s a low efficiency and it is below the energy services industry average of 5.0%.
See our latest review for Helix Energy Solutions Group
In the graph above, we measured Helix Energy Solutions Group’s past ROCE against its past performance, but the future is arguably more important. If you are interested, you can view analyst forecasts in our free analyst forecast report for the company.
So what is the ROCE trend for Helix Energy Solutions group?
While there are companies with higher returns on capital, we still find the trend at Helix Energy Solutions Group promising. Figures show that over the past five years, ROCE has increased by 4.522% while using roughly the same amount of capital. So our view is that the business has increased its efficiency to generate these higher returns, while not needing to make additional investments. On this front, things are looking good, so it’s worth exploring what management has said about growth plans going forward.
Our opinion on the ROCE of Helix Energy Solutions Group
To put it all together, Helix Energy Solutions Group has done well to increase the returns it generates on its capital employed. Given that the stock has fallen 44% over the past five years, this could be a good investment if valuation and other metrics are attractive as well. With that in mind, we believe the promising trends warrant further investigation of this stock.
One more thing, we spotted 3 warning signs facing Helix Energy Solutions Group that you might find interesting.
While Helix Energy Solutions Group does not currently generate the highest returns, we have compiled a list of companies that currently generate over 25% return on equity. Check it out free list here.
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