There's Been No Shortage Of Growth Recently For COSCO SHIPPING Specialized CarriersLtd's (SHSE:600428) Returns On Capital

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Speaking of which, we noticed some great changes in COSCO SHIPPING Specialized CarriersLtd's (SHSE:600428) returns on capital, so let's have a look.

Understanding Return On Capital Employed (ROCE)

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the 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)

0.055 = CN¥1.1b ÷ (CN¥27b - CN¥6.5b) (Based on the trailing twelve months to September 2023).

Therefore, COSCO SHIPPING Specialized CarriersLtd has an ROCE of 5.5%. In absolute terms, that's a low return and it also under-performs the Shipping industry average of 9.1%.

Check out our latest analysis for COSCO SHIPPING Specialized CarriersLtd

In the above chart we have measured COSCO SHIPPING Specialized CarriersLtd's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for COSCO SHIPPING Specialized CarriersLtd .

So How Is COSCO SHIPPING Specialized CarriersLtd's ROCE Trending?

COSCO SHIPPING Specialized CarriersLtd's ROCE growth is quite impressive. The figures show that over the last five years, ROCE has grown 71% whilst employing roughly the same amount of capital. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

The Bottom Line

To sum it up, COSCO SHIPPING Specialized CarriersLtd is collecting higher returns from the same amount of capital, and that's impressive. And with a respectable 46% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. Therefore, we think it would be worth your time to check if these trends are going to continue.

If you want to continue researching COSCO SHIPPING Specialized CarriersLtd, you might be interested to know about the 2 warning signs that our analysis has discovered.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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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.