Duke Energy (NYSE:DUK)’s Return Trend Is Unattractive

What early trends should you look at to find stocks that have the potential to compound in value over the long term? One common approach is to: Return value Return on invested capital (ROCE) is increasing, amount More than 100% of invested capital. When you see this, it usually means it’s a company with a good business model and lots of profitable reinvestment opportunities. Duke Energy We weren’t too excited about (NYSE:DUK) and its ROCE trend.

What is Return on Invested Capital (ROCE)?

For those who don’t know, ROCE is the ratio of a company’s annual pre-tax profit (revenue) to the capital employed in the business. Analysts use the following formula to calculate Duke Energy’s ROCE:

Return on Invested Capital = Earnings Before Interest and Taxes (EBIT) ÷ (Total Assets – Current Liabilities)

0.046 = $7.5 billion ÷ ($179 billion – $16 billion) (Based on the trailing 12 months ending March 2024).

therefore, Duke Energy’s ROCE is 4.6%. While that’s in line with the industry average of 4.8%, that’s still a low return in itself.

View our latest analysis for Duke Energy

In the chart above we’ve measured Duke Energy’s prior ROCE against its previous performance, but the future is arguably more important: if you want to see what analysts are predicting going forward you can take a look at this free analyst report on Duke Energy.

ROCE Trends

Duke Energy’s situation is pretty stable, with invested capital and its return on capital remaining roughly flat for the past five years. This indicates that the company is not reinvesting in itself, and is therefore likely past its growth stage. Therefore, unless Duke Energy sees a significant change in terms of ROCE and additional investments, it would be unreasonable to expect the company to earn multiples in earnings. Additionally, you will also notice that Duke Energy pays out a large portion of its earnings (66%) to shareholders in the form of dividends. If the company is indeed lacking in growth opportunities, this is one viable option to put your money into.

Conclusion on Duke Energy’s ROCE

Simply put, Duke Energy has struggled over the past five years while generating the same revenue from the same capital. Not surprisingly, the company’s share price is up only 37% over the past five years, which may be a sign that investors are taking this into consideration going forward. So, if you’re looking for a multi-bagger, you may have better luck elsewhere.

For more information about Duke Energy, Three warning signs: One of them is important.

For those who want to invest A solid company, Check this out free A list of companies with strong balance sheets and high return on equity.

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This article by Simply Wall St is general in nature. We use only unbiased methodologies to provide commentary based on historical data and analyst forecasts, and our articles are not intended as financial advice. It is not a recommendation to buy or sell stocks, and does not take into account your objectives, or your financial situation. We seek to provide long-term focused analysis driven by fundamental data. Note that our analysis may not take into account the latest price sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned.

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