Here's What To Make Of Capital Clean Energy Carriers' (NASDAQ:CCEC) Decelerating Rates Of Return

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount 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. However, after investigating Capital Clean Energy Carriers (NASDAQ:CCEC), we don't think it's current trends fit the mold of a multi-bagger.

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

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 Capital Clean Energy Carriers, this is the formula:

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

0.056 = US$218m ÷ (US$4.1b - US$229m) (Based on the trailing twelve months to March 2025).

Thus, Capital Clean Energy Carriers has an ROCE of 5.6%. Ultimately, that's a low return and it under-performs the Shipping industry average of 8.5%.

View our latest analysis for Capital Clean Energy Carriers

Above you can see how the current ROCE for Capital Clean Energy Carriers 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 Capital Clean Energy Carriers for free.

What Does the ROCE Trend For Capital Clean Energy Carriers Tell Us?

There are better returns on capital out there than what we're seeing at Capital Clean Energy Carriers. Over the past five years, ROCE has remained relatively flat at around 5.6% and the business has deployed 432% more capital into its operations. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

In Conclusion...

Long story short, while Capital Clean Energy Carriers has been reinvesting its capital, the returns that it's generating haven't increased. Investors must think there's better things to come because the stock has knocked it out of the park, delivering a 242% gain to shareholders who have held over the last five years. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.

If you want to continue researching Capital Clean Energy Carriers, you might be interested to know about the 3 warning signs that our analysis has discovered.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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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.