The Return Trends At Havila Shipping (OB:HAVI) Look Promising

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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So on that note, Havila Shipping (OB:HAVI) looks quite promising in regards to its trends of return on capital.

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Understanding 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. Analysts use this formula to calculate it for Havila Shipping:

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

0.15 = kr138m ÷ (kr1.5b - kr642m) (Based on the trailing twelve months to March 2025).

Thus, Havila Shipping has an ROCE of 15%. In absolute terms, that's a satisfactory return, but compared to the Energy Services industry average of 11% it's much better.

View our latest analysis for Havila Shipping

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

So How Is Havila Shipping's ROCE Trending?

Like most people, we're pleased that Havila Shipping is now generating some pretax earnings. The company was generating losses four years ago, but now it's turned around, earning 15% which is no doubt a relief for some early shareholders. Additionally, the business is utilizing 57% less capital than it was four years ago, and taken at face value, that can mean the company needs less funds at work to get a return. Havila Shipping could be selling under-performing assets since the ROCE is improving.

On a side note, we noticed that the improvement in ROCE appears to be partly fueled by an increase in current liabilities. The current liabilities has increased to 42% of total assets, so the business is now more funded by the likes of its suppliers or short-term creditors. Given it's pretty high ratio, we'd remind investors that having current liabilities at those levels can bring about some risks in certain businesses.

Our Take On Havila Shipping's ROCE

In a nutshell, we're pleased to see that Havila Shipping has been able to generate higher returns from less capital. Given the stock has declined 41% in the last five years, this could be a good investment if the valuation and other metrics are also appealing. So researching this company further and determining whether or not these trends will continue seems justified.

Havila Shipping does come with some risks though, we found 5 warning signs in our investment analysis, and 1 of those can't be ignored...

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. 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.