If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's 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.
We've discovered 4 warning signs about Stolt-Nielsen. View them for free.What Is Return On Capital Employed (ROCE)?
Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for Stolt-Nielsen:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.097 = US$451m ÷ (US$5.5b - US$844m) (Based on the trailing twelve months to February 2025).
Therefore, Stolt-Nielsen has an ROCE of 9.7%. On its own that's a low return on capital but it's in line with the industry's average returns of 9.7%.
See 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'd like, you can check out the forecasts from the analysts covering Stolt-Nielsen for free.
What Can We Tell From Stolt-Nielsen's ROCE Trend?
Stolt-Nielsen's ROCE growth is quite impressive. The figures show that over the last five years, ROCE has grown 169% 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. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.
The Bottom Line On Stolt-Nielsen's ROCE
To sum it up, Stolt-Nielsen is collecting higher returns from the same amount of capital, and that's impressive. And a remarkable 317% total return over the last five years tells us that investors are expecting more good things to come in the future. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.
If you want to know some of the risks facing Stolt-Nielsen we've found 4 warning signs (2 are a bit unpleasant!) that you should be aware of before investing here.
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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