Klaveness Combination Carriers (OB:KCC) Is Doing The Right Things To Multiply Its Share Price

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. 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So when we looked at Klaveness Combination Carriers (OB:KCC) 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. To calculate this metric for Klaveness Combination Carriers, this is the formula:

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

0.068 = US$40m ÷ (US$633m - US$42m) (Based on the trailing twelve months to March 2022).

So, Klaveness Combination Carriers has an ROCE of 6.8%. On its own, that's a low figure but it's around the 7.6% average generated by the Shipping industry.

View our latest analysis for Klaveness Combination Carriers

Above you can see how the current ROCE for Klaveness Combination Carriers 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 report for Klaveness Combination Carriers.

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

While in absolute terms it isn't a high ROCE, it's promising to see that it has been moving in the right direction. Over the last four years, returns on capital employed have risen substantially to 6.8%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 122%. 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.

The Bottom Line On Klaveness Combination Carriers' ROCE

All in all, it's terrific to see that Klaveness Combination Carriers is reaping the rewards from prior investments and is growing its capital base. And with a respectable 53% awarded to those who held the stock over the last three years, you could argue that these developments are starting to get the attention they deserve. In light of that, we think it's worth looking further into this stock because if Klaveness Combination Carriers can keep these trends up, it could have a bright future ahead.

Klaveness Combination Carriers does have some risks, we noticed 4 warning signs (and 1 which shouldn't be ignored) we think you should know about.

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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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.