The Return Trends At SLOMAN NEPTUN Schiffahrts-Aktiengesellschaft (HMSE:NEP) Look Promising

There are a few key trends to look for if we want to identify the next multi-bagger. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing 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 SLOMAN NEPTUN Schiffahrts-Aktiengesellschaft (HMSE:NEP) and its trend of ROCE, we really liked what we saw.

Return On Capital Employed (ROCE): What Is It?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for SLOMAN NEPTUN Schiffahrts-Aktiengesellschaft:

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

0.15 = €40m ÷ (€296m - €30m) (Based on the trailing twelve months to December 2022).

Thus, SLOMAN NEPTUN Schiffahrts-Aktiengesellschaft has an ROCE of 15%. By itself that's a normal return on capital and it's in line with the industry's average returns of 15%.

Check out our latest analysis for SLOMAN NEPTUN Schiffahrts-Aktiengesellschaft

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you're interested in investigating SLOMAN NEPTUN Schiffahrts-Aktiengesellschaft's past further, check out this free graph of past earnings, revenue and cash flow.

The Trend Of ROCE

SLOMAN NEPTUN Schiffahrts-Aktiengesellschaft has not disappointed with their ROCE growth. The figures show that over the last five years, ROCE has grown 1,954% whilst employing roughly the same amount of capital. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. It's worth looking deeper into this though because while it's great that the business is more efficient, it might also mean that going forward the areas to invest internally for the organic growth are lacking.

In Conclusion...

As discussed above, SLOMAN NEPTUN Schiffahrts-Aktiengesellschaft appears to be getting more proficient at generating returns since capital employed has remained flat but earnings (before interest and tax) are up. Investors may not be impressed by the favorable underlying trends yet because over the last five years the stock has only returned 11% to shareholders. So with that in mind, we think the stock deserves further research.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 2 warning signs for SLOMAN NEPTUN Schiffahrts-Aktiengesellschaft (of which 1 is concerning!) that you should know about.

While SLOMAN NEPTUN Schiffahrts-Aktiengesellschaft isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.