Klaveness Combination Carriers (OB:KCC) Might Have The Makings Of A Multi-Bagger

What are the early trends we should look for to identify a stock that could multiply in value over the long term? 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, Klaveness Combination Carriers (OB:KCC) looks quite promising in regards to its trends of return on capital.

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. 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)

0.16 = US$93m ÷ (US$628m - US$47m) (Based on the trailing twelve months to September 2023).

So, Klaveness Combination Carriers has an ROCE of 16%. That's a relatively normal return on capital, and it's around the 14% generated by the Shipping industry.

Check out our latest analysis for Klaveness Combination Carriers

In the above chart we have measured Klaveness Combination Carriers' 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 Klaveness Combination Carriers here for free.

The Trend Of ROCE

We like the trends that we're seeing from Klaveness Combination Carriers. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 16%. Basically the business is earning more per dollar of capital invested and in addition to that, 125% 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.

The Bottom Line On Klaveness Combination Carriers' ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Klaveness Combination Carriers has. Since the stock has returned a solid 89% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. 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.

On a final note, we found 4 warning signs for Klaveness Combination Carriers (1 is significant) you should be aware of.

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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.