Okeanis Eco Tankers (OB:OET) Is Experiencing Growth In Returns On Capital

If you're looking for a multi-bagger, there's a few things to keep an eye out for. 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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So when we looked at Okeanis Eco Tankers (OB:OET) and its trend of ROCE, we really liked what we saw.

What Is Return On Capital Employed (ROCE)?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the 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)

0.17 = US$178m ÷ (US$1.1b - US$108m) (Based on the trailing twelve months to June 2024).

Therefore, Okeanis Eco Tankers has an ROCE of 17%. By itself that's a normal return on capital and it's in line with the industry's average returns of 17%.

View our latest analysis for Okeanis Eco Tankers

In the above chart we have measured Okeanis Eco Tankers' prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Okeanis Eco Tankers .

How Are Returns Trending?

Investors would be pleased with what's happening at Okeanis Eco Tankers. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 17%. Basically the business is earning more per dollar of capital invested and in addition to that, 24% more capital is being employed now too. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

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. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. In light of that, we think it's worth looking further into this stock because if Okeanis Eco Tankers can keep these trends up, it could have a bright future ahead.

One more thing to note, we've identified 2 warning signs with Okeanis Eco Tankers and understanding these should be part of your investment process.

While Okeanis Eco Tankers may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.