Returns At COSCO SHIPPING Energy Transportation (HKG:1138) Are On The Way Up

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Speaking of which, we noticed some great changes in COSCO SHIPPING Energy Transportation's (HKG:1138) returns on capital, so let's have a look.

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

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. To calculate this metric for COSCO SHIPPING Energy Transportation, this is the formula:

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

0.096 = CN¥6.2b ÷ (CN¥72b - CN¥7.6b) (Based on the trailing twelve months to September 2023).

So, COSCO SHIPPING Energy Transportation has an ROCE of 9.6%. In absolute terms, that's a low return, but it's much better than the Oil and Gas industry average of 6.3%.

See our latest analysis for COSCO SHIPPING Energy Transportation

In the above chart we have measured COSCO SHIPPING Energy Transportation's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free report for COSCO SHIPPING Energy Transportation.

What The Trend Of ROCE Can Tell Us

While in absolute terms it isn't a high ROCE, it's promising to see that it has been moving in the right direction. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 9.6%. The amount of capital employed has increased too, by 20%. So we're very much inspired by what we're seeing at COSCO SHIPPING Energy Transportation thanks to its ability to profitably reinvest capital.

What We Can Learn From COSCO SHIPPING Energy Transportation's ROCE

All in all, it's terrific to see that COSCO SHIPPING Energy Transportation is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 111% 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 Energy Transportation can keep these trends up, it could have a bright future ahead.

COSCO SHIPPING Energy Transportation does have some risks though, and we've spotted 1 warning sign for COSCO SHIPPING Energy Transportation that you might be interested in.

While COSCO SHIPPING Energy Transportation isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.