TSE:SES), we weren’t too upbeat about how things were going.” data-reactid=”28″>What underlying fundamental trends can indicate that a company might be in decline? More often than not, we’ll see a declining return on capital employed (ROCE) and a declining amount of capital employed. Trends like this ultimately mean the business is reducing its investments and also earning less on what it has invested. On that note, looking into Secure Energy Services (TSE:SES), we weren’t too upbeat about how things were going.
What is 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. To calculate this metric for Secure Energy Services, this is the formula:
View our latest analysis for Secure Energy Services ” data-reactid=”38″> View our latest analysis for Secure Energy Services
report for Secure Energy Services.” data-reactid=”51″>Above you can see how the current ROCE for Secure Energy Services compares to its prior returns on capital, but there’s only so much you can tell from the past. If you’d like to see what analysts are forecasting going forward, you should check out our free report for Secure Energy Services.
So How Is Secure Energy Services’ ROCE Trending?
We are a bit worried about the trend of returns on capital at Secure Energy Services. Unfortunately the returns on capital have diminished from the 3.1% that they were earning five years ago. And on the capital employed front, the business is utilizing roughly the same amount of capital as it was back then. Since returns are falling and the business has the same amount of assets employed, this can suggest it’s a mature business that hasn’t had much growth in the last five years. So because these trends aren’t typically conducive to creating a multi-bagger, we wouldn’t hold our breath on Secure Energy Services becoming one if things continue as they have.
The Key Takeaway
In the end, the trend of lower returns on the same amount of capital isn’t typically an indication that we’re looking at a growth stock. Unsurprisingly then, the stock has dived 82% over the last five years, so investors are recognizing these changes and don’t like the company’s prospects. That being the case, unless the underlying trends revert to a more positive trajectory, we’d consider looking elsewhere.
3 warning signs with Secure Energy Services (at least 1 which is a bit concerning) , and understanding them would certainly be useful.” data-reactid=”56″>One more thing: We’ve identified 3 warning signs with Secure Energy Services (at least 1 which is a bit concerning) , and understanding them would certainly be useful.
list of companies that are earning high returns on equity with solid balance sheets.” data-reactid=”57″>While Secure Energy Services isn’t earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.
Get in touch with us directly. Alternatively, email [email protected].” data-reactid=”58″>This article by Simply Wall St is general in nature. 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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