Is SLOMAN NEPTUN Schiffahrts-Aktiengesellschaft (HMSE:NEP) A Future Multi-bagger?

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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So when we looked at SLOMAN NEPTUN Schiffahrts-Aktiengesellschaft (HMSE:NEP) 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 SLOMAN NEPTUN Schiffahrts-Aktiengesellschaft is:

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

0.038 = €12m ÷ (€331m - €13m) (Based on the trailing twelve months to June 2020).

So, SLOMAN NEPTUN Schiffahrts-Aktiengesellschaft has an ROCE of 3.8%. In absolute terms, that's a low return and it also under-performs the Shipping industry average of 5.6%.

Check out our latest analysis for SLOMAN NEPTUN Schiffahrts-Aktiengesellschaft

Historical performance is a great place to start when researching a stock so above you can see the gauge for SLOMAN NEPTUN Schiffahrts-Aktiengesellschaft's ROCE against it's prior returns. If you'd like to look at how SLOMAN NEPTUN Schiffahrts-Aktiengesellschaft has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

How Are Returns Trending?

While the ROCE isn't as high as some other companies out there, it's great to see it's on the up. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 69% in that same time. 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. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

The Key Takeaway

To sum it up, SLOMAN NEPTUN Schiffahrts-Aktiengesellschaft is collecting higher returns from the same amount of capital, and that's impressive. And since the stock has fallen 17% over the last three years, there might be an opportunity here. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

SLOMAN NEPTUN Schiffahrts-Aktiengesellschaft does have some risks, we noticed 4 warning signs (and 2 which make us uncomfortable) we think you should know about.

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. 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.
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