Has Klaveness Combination Carriers (OB:KCC) Got What It Takes To Become A Multi-Bagger?

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. In light of that, when we looked at Klaveness Combination Carriers (OB:KCC) and its ROCE trend, we weren't exactly thrilled.

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 Klaveness Combination Carriers:

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

0.061 = US$28m ÷ (US$502m - US$43m) (Based on the trailing twelve months to September 2020).

Therefore, Klaveness Combination Carriers has an ROCE of 6.1%. In absolute terms, that's a low return but it's around the Shipping industry average of 5.3%.

See our latest analysis for Klaveness Combination Carriers

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

What Can We Tell From Klaveness Combination Carriers' ROCE Trend?

The returns on capital haven't changed much for Klaveness Combination Carriers in recent years. The company has employed 77% more capital in the last two years, and the returns on that capital have remained stable at 6.1%. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

In Conclusion...

Long story short, while Klaveness Combination Carriers has been reinvesting its capital, the returns that it's generating haven't increased. Since the stock has declined 21% over the last year, investors may not be too optimistic on this trend improving either. Therefore based on the analysis done in this article, we don't think Klaveness Combination Carriers has the makings of a multi-bagger.

If you'd like to know more about Klaveness Combination Carriers, we've spotted 2 warning signs, and 1 of them is significant.

While Klaveness Combination Carriers isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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