- Norway
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- Marine and Shipping
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- OB:SNI
Stolt-Nielsen (OB:SNI) Is Doing The Right Things To Multiply Its Share Price
There are a few key trends to look for if we want to identify the next multi-bagger. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount 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. Speaking of which, we noticed some great changes in Stolt-Nielsen's (OB:SNI) returns on capital, so let's have a look.
Understanding Return On Capital Employed (ROCE)
If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Stolt-Nielsen, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.12 = US$440m ÷ (US$4.7b - US$962m) (Based on the trailing twelve months to February 2023).
So, Stolt-Nielsen has an ROCE of 12%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Shipping industry average of 11%.
View our latest analysis for Stolt-Nielsen
Above you can see how the current ROCE for Stolt-Nielsen compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.
SWOT Analysis for Stolt-Nielsen
- Earnings growth over the past year exceeded the industry.
- Debt is well covered by earnings and cashflows.
- Dividends are covered by earnings and cash flows.
- Dividend is in the top 25% of dividend payers in the market.
- No major weaknesses identified for SNI.
- Annual earnings are forecast to grow faster than the Norwegian market.
- Good value based on P/E ratio and estimated fair value.
- Revenue is forecast to grow slower than 20% per year.
The Trend Of ROCE
Stolt-Nielsen has not disappointed with their ROCE growth. The figures show that over the last five years, ROCE has grown 146% whilst employing roughly the same amount of capital. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. It's worth looking deeper into this though because while it's great that the business is more efficient, it might also mean that going forward the areas to invest internally for the organic growth are lacking.
In Conclusion...
In summary, we're delighted to see that Stolt-Nielsen has been able to increase efficiencies and earn higher rates of return on the same amount of capital. And a remarkable 168% total return over the last five years tells us that investors are expecting more good things to come in the future. Therefore, we think it would be worth your time to check if these trends are going to continue.
On a final note, we've found 2 warning signs for Stolt-Nielsen that we think you should be aware of.
While Stolt-Nielsen 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.
About OB:SNI
Stolt-Nielsen
Provides transportation, storage, and distribution solutions for bulk liquid chemicals, edible oils, acids, and other specialty liquids worldwide.
Undervalued established dividend payer.