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Capital Allocation Trends At Clearway Energy (NYSE:CWEN.A) Aren't Ideal

Simply Wall St · 6d ago

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. However, after briefly looking over the numbers, we don't think Clearway Energy (NYSE:CWEN.A) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

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

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Clearway Energy, this is the formula:

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

0.011 = US$172m ÷ (US$16b - US$687m) (Based on the trailing twelve months to September 2025).

Therefore, Clearway Energy has an ROCE of 1.1%. In absolute terms, that's a low return and it also under-performs the Renewable Energy industry average of 4.2%.

View our latest analysis for Clearway Energy

roce
NYSE:CWEN.A Return on Capital Employed January 3rd 2026

In the above chart we have measured Clearway Energy's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Clearway Energy .

How Are Returns Trending?

Unfortunately, the trend isn't great with ROCE falling from 4.0% five years ago, while capital employed has grown 69%. That being said, Clearway Energy raised some capital prior to their latest results being released, so that could partly explain the increase in capital employed. The funds raised likely haven't been put to work yet so it's worth watching what happens in the future with Clearway Energy's earnings and if they change as a result from the capital raise.

What We Can Learn From Clearway Energy's ROCE

In summary, Clearway Energy is reinvesting funds back into the business for growth but unfortunately it looks like sales haven't increased much just yet. Unsurprisingly, the stock has only gained 27% over the last five years, which potentially indicates that investors are accounting for this going forward. As a result, if you're hunting for a multi-bagger, we think you'd have more luck elsewhere.

Clearway Energy does have some risks, we noticed 4 warning signs (and 2 which don't sit too well with us) we think you should know about.

While Clearway Energy may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.