Advertisement
Canada markets close in 57 minutes
  • S&P/TSX

    22,853.98
    -141.41 (-0.61%)
     
  • S&P 500

    5,591.33
    -75.87 (-1.34%)
     
  • DOW

    41,177.86
    +223.38 (+0.55%)
     
  • CAD/USD

    0.7306
    -0.0009 (-0.12%)
     
  • CRUDE OIL

    82.82
    +2.06 (+2.55%)
     
  • Bitcoin CAD

    88,351.05
    -302.80 (-0.34%)
     
  • CMC Crypto 200

    1,337.86
    -4.46 (-0.33%)
     
  • GOLD FUTURES

    2,461.70
    -6.10 (-0.25%)
     
  • RUSSELL 2000

    2,244.86
    -18.82 (-0.83%)
     
  • 10-Yr Bond

    4.1500
    -0.0170 (-0.41%)
     
  • NASDAQ

    18,005.29
    -504.04 (-2.72%)
     
  • VOLATILITY

    14.52
    +1.33 (+10.11%)
     
  • FTSE

    8,187.46
    +22.56 (+0.28%)
     
  • NIKKEI 225

    41,097.69
    -177.39 (-0.43%)
     
  • CAD/EUR

    0.6678
    -0.0030 (-0.45%)
     

Halliburton (NYSE:HAL) Could Become A Multi-Bagger

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount 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. And in light of that, the trends we're seeing at Halliburton's (NYSE:HAL) look very promising so lets take a look.

Return On Capital Employed (ROCE): What Is It?

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. Analysts use this formula to calculate it for Halliburton:

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

0.21 = US$4.1b ÷ (US$25b - US$5.4b) (Based on the trailing twelve months to March 2024).

ADVERTISEMENT

Therefore, Halliburton has an ROCE of 21%. That's a fantastic return and not only that, it outpaces the average of 12% earned by companies in a similar industry.

Check out our latest analysis for Halliburton

roce
roce

Above you can see how the current ROCE for Halliburton 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 Halliburton for free.

The Trend Of ROCE

Halliburton has not disappointed with their ROCE growth. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 84% in that same time. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. It's worth looking deeper into this though because while it's great that the business is more efficient, it might also mean that going forward the areas to invest internally for the organic growth are lacking.

The Bottom Line

To bring it all together, Halliburton has done well to increase the returns it's generating from its capital employed. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 73% return over the last five years. In light of that, we think it's worth looking further into this stock because if Halliburton can keep these trends up, it could have a bright future ahead.

Like most companies, Halliburton does come with some risks, and we've found 2 warning signs that you should be aware of.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.