Investors Will Want Okeanis Eco Tankers' (OB:OET) Growth In ROCE To Persist

What are the early trends we should look for to identify a stock that could multiply in value over the long term? 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. So on that note, Okeanis Eco Tankers (OB:OET) looks quite promising in regards to its trends of return on capital.

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. The formula for this calculation on Okeanis Eco Tankers is:

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

0.10 = US$110m ÷ (US$1.2b - US$93m) (Based on the trailing twelve months to December 2022).

Therefore, Okeanis Eco Tankers has an ROCE of 10%. That's a relatively normal return on capital, and it's around the 12% generated by the Oil and Gas industry.

Check out our latest analysis for Okeanis Eco Tankers

Above you can see how the current ROCE for Okeanis Eco Tankers compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

SWOT Analysis for Okeanis Eco Tankers

How Are Returns Trending?

The trends we've noticed at Okeanis Eco Tankers are quite reassuring. Over the last four years, returns on capital employed have risen substantially to 10%. Basically the business is earning more per dollar of capital invested and in addition to that, 72% more capital is being employed now too. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

Our Take On Okeanis Eco Tankers' ROCE

All in all, it's terrific to see that Okeanis Eco Tankers is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 466% to shareholders over the last three years, it looks like investors are recognizing these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

On a final note, we found 2 warning signs for Okeanis Eco Tankers (1 shouldn't be ignored) you should be aware of.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.