COSCO SHIPPING Specialized CarriersLtd (SHSE:600428) Is Doing The Right Things To Multiply Its Share Price

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at COSCO SHIPPING Specialized CarriersLtd (SHSE:600428) and its trend of ROCE, we really liked what we saw.

What Is Return On Capital Employed (ROCE)?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on COSCO SHIPPING Specialized CarriersLtd is:

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

0.069 = CN¥1.7b ÷ (CN¥33b - CN¥8.5b) (Based on the trailing twelve months to September 2024).

Therefore, COSCO SHIPPING Specialized CarriersLtd has an ROCE of 6.9%. In absolute terms, that's a low return and it also under-performs the Shipping industry average of 8.8%.

See our latest analysis for COSCO SHIPPING Specialized CarriersLtd

Above you can see how the current ROCE for COSCO SHIPPING Specialized CarriersLtd compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for COSCO SHIPPING Specialized CarriersLtd .

The Trend Of ROCE

Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 6.9%. Basically the business is earning more per dollar of capital invested and in addition to that, 53% more capital is being employed now too. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

The Bottom Line

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what COSCO SHIPPING Specialized CarriersLtd has. Since the stock has returned a staggering 105% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if COSCO SHIPPING Specialized CarriersLtd can keep these trends up, it could have a bright future ahead.

One more thing to note, we've identified 3 warning signs with COSCO SHIPPING Specialized CarriersLtd and understanding them should be part of your investment process.

While COSCO SHIPPING Specialized CarriersLtd 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.