We're Watching These Trends At d'Amico International Shipping (BIT:DIS)

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Having said that, from a first glance at d'Amico International Shipping (BIT:DIS) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

Understanding Return On Capital Employed (ROCE)

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 d'Amico International Shipping:

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

0.077 = US$70m ÷ (US$1.1b - US$160m) (Based on the trailing twelve months to September 2020).

So, d'Amico International Shipping has an ROCE of 7.7%. In absolute terms, that's a low return but it's around the Oil and Gas industry average of 6.5%.

See our latest analysis for d'Amico International Shipping

In the above chart we have measured d'Amico International Shipping'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 d'Amico International Shipping.

What Does the ROCE Trend For d'Amico International Shipping Tell Us?

In terms of d'Amico International Shipping's historical ROCE trend, it doesn't exactly demand attention. The company has employed 25% more capital in the last five years, and the returns on that capital have remained stable at 7.7%. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.

The Bottom Line On d'Amico International Shipping's ROCE

In conclusion, d'Amico International Shipping has been investing more capital into the business, but returns on that capital haven't increased. Moreover, since the stock has crumbled 76% over the last five years, it appears investors are expecting the worst. Therefore based on the analysis done in this article, we don't think d'Amico International Shipping has the makings of a multi-bagger.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 3 warning signs for d'Amico International Shipping (of which 2 are significant!) that 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.

If you’re looking to trade d'Amico International Shipping, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

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