Höegh Autoliners (OB:HAUTO) Could Become A Multi-Bagger

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, the ROCE of Höegh Autoliners (OB:HAUTO) looks great, so lets see what the trend can tell us.

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

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 Höegh Autoliners:

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

0.37 = US$586m ÷ (US$1.9b - US$288m) (Based on the trailing twelve months to March 2024).

So, Höegh Autoliners has an ROCE of 37%. In absolute terms that's a great return and it's even better than the Shipping industry average of 19%.

View our latest analysis for Höegh Autoliners

Above you can see how the current ROCE for Höegh Autoliners compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Höegh Autoliners .

The Trend Of ROCE

Höegh Autoliners is showing promise given that its ROCE is trending up and to the right. The figures show that over the last five years, ROCE has grown 51,110% whilst employing roughly the same amount of capital. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

The Bottom Line

To sum it up, Höegh Autoliners is collecting higher returns from the same amount of capital, and that's impressive. Since the stock has returned a staggering 156% to shareholders over the last year, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if Höegh Autoliners can keep these trends up, it could have a bright future ahead.

On a final note, we found 3 warning signs for Höegh Autoliners (2 are concerning) you should be aware of.

High returns are a key ingredient to strong performance, so check out our free list ofstocks 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.

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