What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So when we looked at Helmerich & Payne (NYSE:HP) and its trend of ROCE, we really liked what we saw.

What Is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Helmerich & Payne is:

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

0.10 = US$419m ÷ (US$4.5b - US$457m) (Based on the trailing twelve months to June 2024).

So, Helmerich & Payne has an ROCE of 10%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Energy Services industry average of 11%.

Check out our latest analysis for Helmerich & Payne

Above you can see how the current ROCE for Helmerich & Payne 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 analyst report for Helmerich & Payne .

So How Is Helmerich & Payne's ROCE Trending?

You'd find it hard not to be impressed with the ROCE trend at Helmerich & Payne. The figures show that over the last five years, returns on capital have grown by 145%. That's not bad because this tells for every dollar invested (capital employed), the company is increasing the amount earned from that dollar. Speaking of capital employed, the company is actually utilizing 27% less than it was five years ago, which can be indicative of a business that's improving its efficiency. Helmerich & Payne may be selling some assets so it's worth investigating if the business has plans for future investments to increase returns further still.

Our Take On Helmerich & Payne's ROCE

From what we've seen above, Helmerich & Payne has managed to increase it's returns on capital all the while reducing it's capital base. Investors may not be impressed by the favorable underlying trends yet because over the last five years the stock has only returned 9.7% to shareholders. So exploring more about this stock could uncover a good opportunity, if the valuation and other metrics stack up.