Returns On Capital Are A Standout For Höegh Autoliners (OB:HAUTO)

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. 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. To calculate this metric for Höegh Autoliners, this is the formula:

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

0.24 = US$386m ÷ (US$1.8b - US$231m) (Based on the trailing twelve months to March 2023).

Therefore, Höegh Autoliners has an ROCE of 24%. In absolute terms that's a great return and it's even better than the Shipping industry average of 11%.

See our latest analysis for Höegh Autoliners

In the above chart we have measured Höegh Autoliners' prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Höegh Autoliners here for free.

What The Trend Of ROCE Can Tell Us

Höegh Autoliners is showing promise given that its ROCE is trending up and to the right. The figures show that over the last four years, ROCE has grown 33,801% whilst employing roughly the same amount of capital. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

What We Can Learn From Höegh Autoliners' ROCE

To sum it up, Höegh Autoliners is collecting higher returns from the same amount of capital, and that's impressive. And a remarkable 143% total return over the last year tells us that investors are expecting more good things to come in the future. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

If you want to know some of the risks facing Höegh Autoliners we've found 2 warning signs (1 can't be ignored!) that you should be aware of before investing here.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning 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.