We Like These Underlying Return On Capital Trends At COSCO SHIPPING Specialized CarriersLtd (SHSE:600428)

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. 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. 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. To calculate this metric for COSCO SHIPPING Specialized CarriersLtd, this is the formula:

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

0.054 = CN¥1.2b ÷ (CN¥31b - CN¥8.1b) (Based on the trailing twelve months to June 2024).

So, COSCO SHIPPING Specialized CarriersLtd has an ROCE of 5.4%. Ultimately, that's a low return and it under-performs the Shipping industry average of 7.5%.

Check out 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 5.4%. The amount of capital employed has increased too, by 40%. So we're very much inspired by what we're seeing at COSCO SHIPPING Specialized CarriersLtd thanks to its ability to profitably reinvest capital.

The Bottom Line

All in all, it's terrific to see that COSCO SHIPPING Specialized CarriersLtd is reaping the rewards from prior investments and is growing its capital base. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 65% return over the last five years. Therefore, we think it would be worth your time to check if these trends are going to continue.

On a separate note, we've found 3 warning signs for COSCO SHIPPING Specialized CarriersLtd you'll probably want to know about.

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.