Duke Energy (NYSE:DUK), a significant player in the energy sector, has been maintaining a steady return on capital employed (ROCE) of 4.1% over the past five years, despite a significant expansion in its capital base. The company's ability to sustain its ROCE level while managing a 28% surge in capital during this period presents an intriguing aspect of its business operations.
ROCE is a critical metric that measures pre-tax income returns on business investment. It is calculated by dividing earnings before interest and tax (EBIT) by total assets minus current liabilities. This metric serves as an indicator of a company's efficiency and profitability from its capital investments.
While Duke Energy's ROCE is consistent with the industry average of 4.5%, it falls short of making a substantial impression. Investors seeking multi-bagger stocks often look for trends such as increasing ROCE and a growing base of capital employed, which are considered attributes of a robust business model with considerable reinvestment opportunities.
Despite the stability in its ROCE, Duke Energy's figure is still viewed as a low return. However, the firm's ability to maintain this level while expanding its capital base by 28% over the same period may indicate potential for future growth and an efficient use of its resources.
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