WEBULL

2G Energy (ETR:2GB) Is Reinvesting To Multiply In Value

Simply Wall St · 07/30 04:06

What trends should we look for it we want to identify stocks that can multiply in value over the long term? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. That's why when we briefly looked at 2G Energy's (ETR:2GB) ROCE trend, we were very happy with what we saw.

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Understanding Return On Capital Employed (ROCE)

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. To calculate this metric for 2G Energy, this is the formula:

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

0.20 = €33m ÷ (€278m - €116m) (Based on the trailing twelve months to December 2024).

Thus, 2G Energy has an ROCE of 20%. That's a fantastic return and not only that, it outpaces the average of 10% earned by companies in a similar industry.

See our latest analysis for 2G Energy

roce
XTRA:2GB Return on Capital Employed July 30th 2025

Above you can see how the current ROCE for 2G Energy 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 2G Energy for free.

The Trend Of ROCE

It's hard not to be impressed by 2G Energy's returns on capital. Over the past five years, ROCE has remained relatively flat at around 20% and the business has deployed 108% more capital into its operations. Now considering ROCE is an attractive 20%, this combination is actually pretty appealing because it means the business can consistently put money to work and generate these high returns. If 2G Energy can keep this up, we'd be very optimistic about its future.

On a separate but related note, it's important to know that 2G Energy has a current liabilities to total assets ratio of 42%, which we'd consider pretty high. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. Ideally we'd like to see this reduce as that would mean fewer obligations bearing risks.

The Key Takeaway

2G Energy has demonstrated its proficiency by generating high returns on increasing amounts of capital employed, which we're thrilled about. And long term investors would be thrilled with the 102% return they've received over the last five years. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

While 2G Energy looks impressive, no company is worth an infinite price. The intrinsic value infographic for 2GB helps visualize whether it is currently trading for a fair price.

High returns are a key ingredient to strong performance, so check out our free list ofstocks earning high returns on equity with solid balance sheets.