Here's What's Concerning About OceanPact Serviços Marítimos' (BVMF:OPCT3) Returns On Capital

There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. In light of that, when we looked at OceanPact Serviços Marítimos (BVMF:OPCT3) and its ROCE trend, we weren't exactly thrilled.

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. Analysts use this formula to calculate it for OceanPact Serviços Marítimos:

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

0.0021 = R$3.5m ÷ (R$2.2b - R$582m) (Based on the trailing twelve months to September 2022).

So, OceanPact Serviços Marítimos has an ROCE of 0.2%. In absolute terms, that's a low return and it also under-performs the Commercial Services industry average of 15%.

See our latest analysis for OceanPact Serviços Marítimos

In the above chart we have measured OceanPact Serviços Marítimos' prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering OceanPact Serviços Marítimos here for free.

The Trend Of ROCE

In terms of OceanPact Serviços Marítimos' historical ROCE movements, the trend isn't fantastic. Around five years ago the returns on capital were 2.2%, but since then they've fallen to 0.2%. However, given capital employed and revenue have both increased it appears that the business is currently pursuing growth, at the consequence of short term returns. If these investments prove successful, this can bode very well for long term stock performance.

While on the subject, we noticed that the ratio of current liabilities to total assets has risen to 26%, which has impacted the ROCE. If current liabilities hadn't increased as much as they did, the ROCE could actually be even lower. Keep an eye on this ratio, because the business could encounter some new risks if this metric gets too high.

The Bottom Line

Even though returns on capital have fallen in the short term, we find it promising that revenue and capital employed have both increased for OceanPact Serviços Marítimos. Furthermore the stock has climbed 18% over the last year, it would appear that investors are upbeat about the future. So while the underlying trends could already be accounted for by investors, we still think this stock is worth looking into further.

If you'd like to know about the risks facing OceanPact Serviços Marítimos, we've discovered 2 warning signs that you should be aware of.

While OceanPact Serviços Marítimos 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.

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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.