Will Tsakos Energy Navigation (NYSE:TNP) Multiply In Value Going Forward?
If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base 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. However, after investigating Tsakos Energy Navigation (NYSE:TNP), we don't think it's current trends fit the mold of a multi-bagger.
Return On Capital Employed (ROCE): What is it?
For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for Tsakos Energy Navigation:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.065 = US$185m ÷ (US$3.2b - US$317m) (Based on the trailing twelve months to June 2020).
So, Tsakos Energy Navigation has an ROCE of 6.5%. In absolute terms, that's a low return and it also under-performs the Oil and Gas industry average of 8.8%.
View our latest analysis for Tsakos Energy Navigation
Above you can see how the current ROCE for Tsakos Energy Navigation 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 Tsakos Energy Navigation here for free.
So How Is Tsakos Energy Navigation's ROCE Trending?
There hasn't been much to report for Tsakos Energy Navigation's returns and its level of capital employed because both metrics have been steady for the past five years. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. So don't be surprised if Tsakos Energy Navigation doesn't end up being a multi-bagger in a few years time.
In Conclusion...
We can conclude that in regards to Tsakos Energy Navigation's returns on capital employed and the trends, there isn't much change to report on. Moreover, since the stock has crumbled 71% over the last five years, it appears investors are expecting the worst. Therefore based on the analysis done in this article, we don't think Tsakos Energy Navigation has the makings of a multi-bagger.
If you'd like to know more about Tsakos Energy Navigation, we've spotted 5 warning signs, and 2 of them shouldn't be ignored.
If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.
This article by Simply Wall St is general in nature. 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.
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